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FI  E P=  O R,  T 


COMMITTEE  ON  FINANCE 


HOUSE  OF  REPRESENTATIVES,  33R  GENERAL  ASSEMBLY, 

« 

■*  IN  RELATION  TO  THE 

Payment  by  the  Illinois  Central  Railroad  Cornpany  of 
Seven  per  cent,  of  its  Gross  Earnings  into 
the  Treasury  of  the  State. 


SUB-COMMITTEE  OF  INVESTIGATION: 

Seth  ¥.  Crews,  Chairman. 

Henry  F.  Walker,  Ben.  F.  Caldwell, 

Kobt.  B.  Kennedy,  Geo.  H.  Varnell, 

I.  N.  Pearson,  Bevilo  Newton. 


PRINTED  BY  ORDER  OF  THE  HOUSE. 


SPRINGFIEILD  : 

H.  W.  Rofkek,  State  Printer  and  Binder. 

1883. 


1 

i . 
i j 


I '! 


I ; 


R-  e:  F O R,  T 


COMMITTEE  ON  FINANCE 


HOUSE  OF  REPRESENTATIVES,  33D  OENERAL  ASSEMBLY, 

IN  KELATION  TO  THE 

Payment  by  the  Illinois  Central  Railroad  Company  of 
Seven  per  cent,  of  its  Gross  Earnings  into 
the  Treasury  of  the  State. 


SUB-COMMITTEE  OF  INVESTIGATION  : 


Seth  F.  Crews, 
Henry  F.  Walker, 

Eobt.  B.  Kennedy, 

I.  N.  Pearson, 


Chairman. 

Ben.  F.  Caldwell, 
Geo.  H.  Yarnell, 
Eevilo  Newton. 


PRINTED  BY  ORDER  OF  THE  HOUSE. 


SPRINGFIELD  : 

B.  W.  Rofkee,  State  Peintee  and  Bindee. 

1883. 


TABLE  OF  CONTENTS. 


Page  . 

Report  of  the  Committee *. 1 

Exhibit  A— Tons  of  freight  carried  one  mile 7 

Exhibit  B— Lease  by  Kankakee  and  Southwestern  R.  R.  Co.  to  the  Illinois  Central 7 

Exhibit  C— Results  of  operating  Chicago  and  Springfield  Railroad 10 

C— Results  of  operating  Kankakee  and  Southwestern  Railroad 10 

Exhibit  D— Gross  earnings  Illinois  Central  proper,  from  1876  to  1882 11 

Exhibit  E— Tons  of  freight  carried  one  mile,  and  rate  per  ton  per  mile 12 

Exhibit  E— Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  April,  1878 12 

^Exhibit  G— Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  October  31,1878..  13 

Exhibit  H--Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  April  30, 1879 13 

Exhibit  J— Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  October  31,1879. . 14 

Exhibit  K— Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  April  30,1880 14 

— Exhibit  L—Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  October  31, 1880. . 15 

'^Exhibit  M— Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  April  30,1881 15 

^ Exhibit  N— Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  October  31, 1881 . . 16 

Exhibit  0— Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  April  30, 1882 16 

^ Exhibit  P— Gross  earnings  Illinois  Central  R.  R.  for  six  months  ending  October  31, 1882. . 17 

TESTIMONY. 

Hon.  S.  M.  Cullom .• : 17 

Joseph  F.  Tucker  (Traffic  Manager  L C.  R.  R) 20 

E.  P.  Ripley  (General  Freight  Agent  C.,  B.  & Q.) 27 

C.  H.  Chappell  (Acting  General  Manager  C.  &.  A.) 34 

Ransom  R.  Cable  (a  railroad  manager) 38 

William  S,  Mellen  (General  Freight  Agent  C.  & N.  W.) 40 

John  C.  W elling  (General  Auditor  I.  C.  R.  R.) 44, 65 

c-  James  C.  Clarke  (Vice  President  and  General  Manager  I.  C.  R.  R.) 50 


EEPOET  OF  THE  COMMITTEE. 


Springfield,  Illinois,  April  26,  1883. 

To  the  Honorable  Lorin  C.  Collins,  Jr.,  Speaker  of  the  House  of 

Representatives  of  the  8Sd  General  Assembly: 

In  pursuance  of  the  following  resolution  of  the  House,  viz : 

Wheeeas,  divers  newspapers  and  individuals  throughout  the  State  of  Illinois  have 
hitherto  expressed  doubts  of  the  correctness  of  the  returns  made  by  the  Illinois  Central 
Railroad  Company,  of  this  State,  of  their  gross  earnings,  on  which  to  base  the  tax  of 
seven  per  cent.,  as  provided  by  the  charter  of  said  company,  approved  February  10,  1851; 
and 

Whereas,  the  interests  of  the  people  have  hitherto  been  jealously  guarded  by  con- 
stitutional limitation,  prohibiting  the  releasing,  impairing,  modifying,  altering  or  remit- 
ting, in  any  manner,  said  tax  of  seven  per  cent.,  or  the  diminishing  or  impairing  of  the 
same  by  legislation  or  any  other  authority;  and. 

Whereas,  we  do  hereby  declare  we  deem  it  the  duty  of  the  General  Assembly  to 
carefully  guard  the  interests  of  the  public  in. this  behalf  against  the  direct  or  the  indirect 
avoidance  of  the  payment  of  any  part  of  said  tax  by  any  means  whatsoever,  and  to  the 
end  that  the  General  Assembly  may  be  more  fully  informed,  and  the  rights  and  the  inter- 
ests of  the  tax-payers  and  the  people  in  the  premises  protected;  therefore,  be  it 

/?csoZred,  That  the  committee  on  finance  of  this  House  be  instructed,  and  it  shall  be 
their  duty,  to  examine  into  all  charges  that  have  been  or  may  hereafter  be  made  by  any 
person  or  persons  whomsoever,  that  the  grave  doubts  of  suspicion  against  the  said 
Illinois  Central  Railroad  may  be  satisfactorily  explained  and  the  people  fully  satisfied 
that  everything  is  being  fairly  and  honestly  done  concerning  the  return  or  returns  made 
by  the  said  road  or  its  officers  under  the  terms  of  its  charter;  that  said  committee  shall 
have  power  to  send  for  persons  and  papers,  and  be  entitled  to  demand  an  inspection  of 
all  the  books  and  papers  of  said  company  by  them  deemed  necessary,  and  to  this  end 
may  visit  the  offices  of  said  company  in  Chicago,  and  the  chairman  of  said  committee 
shall  have  the  authority  to  employ  any  necessary  experts  and  accountants  to  aid  in  such 
examination  and  investigation;  the  reasonable  expenses  of  such  experts,  accountants 
and  the  committee  to  be  paid  by  the  State,  out  of  any  appropriation  made  for  the  contin- 
gent expenses  of  the  General  Assembly. 

At  a meeting  of  said  finance  committee,  at  which  all  members 
save  one  were  present,  we  appointed,  by  resolution,  a snb-committee 
of  seven  of  our  number  to  make  the  investigation  contemplated  in 
said  resolution,  namely:  Seth  F.  Crews,  chairman,  Henry  F. 

Walker,  Eobert  F.  Kennedy,  Isaac  N.  Pearson,  George  H.  Varnell, 
Ben.  F.  Caldwell  and  Eevilo  Newton.  Said  committee  has  to  the 
best  of  its  ability  performed  its  duties  devolving  upon  it  by  virtue 
of  said  resolution. 

Said  committee  held  open  sessions,  and  any  or  all  who  had  any 
facts  to  disclose  to  said  committee,  touching  the  questions  under 
investigation,  had  an  opportunity  to  do  so;  and  they  now  respect- 
fully submit  their  report. 

That  said  sub-committee  first  proceeded  to  take  and  hear  the 
testimony  of  Ex-Governor  Shelby  M.  Callom,  who  testified  in  sub- 
stance, that  last  year  he  appointed  Mr.  Leonard,  with  authority  to 
employ  a good  accountant,  and  to  proceed  and  make  an  examina- 
tion of  the  books  and  accounts  of  the  Illinois  Central  Eailroad 
Company,  so  far  as  they  relate  to  the  interests  of  the  State.  Said 
examination  was  made,  with  the  aid  of  an  expert,  and  their  report 
is  made  a_  part  of  the  Governor’s  testimony,  (for  a fuller  detail, 
reference  is  had  to  said  testimony,  which  is  made  a part  of  this 
report.) 

Said  sub-committee  then,  on  the  20th  day  of  March,  went  to 
Chicago,  where  the  general  offices,  books  and  accounts  of  said  com- 


6 


pany  are  kept;  and  proceeded  with  the  investigation  by  examining, 
under  oath,  the  president,  vice-president,  auditor,  and  general  traffic 
manager  of  the  Illinois  Central  Eailroad  Company,  touching  the 
manner  of  keeping  their  accounts  and  dividing  “gross  earnings’' 
with  their  auxiliary  lines  of  railroad. 

And  that  the  committee  might  be  the  more  fully  advised  and 
informed  on  this  subject,  we  also  subpoenied  and  examined  under 
oath,  Mr.  E.  P.  Eipley,  General  Freight  Agent  C.,  B.  & Q.  E.  E., 
Mr.  C.  U.  Chappell,  Acting  General  Manager  Chicago  and  Alton 
E.  E.,  Eansom  E.  Cable,  General  Manager  Chicago,  Eock  Island 
and  Pacific  E.  E.,  and  William  S.  Mellen,  General  Manager  Chicago 
and  Northwestern  E.  E. 

The  testimony  of  all  the  witnesses  was  taken  in  full  by  a short- 
hand reporter,  and  is  attached  hereto  as  a part  of  this  report. 

After  the  taking  of  the  testimony,  your  committee  then  proceeded 
to  examine  the  books  with  reference  to  whether  they  had  been  kept 
in  the  manner  described  by  their  officers  in  their  testimony,  and  to 
see  if  the  gross  earnings  were  reported  as  claimed,  and  whether 
their  reports  to  the  State  were  actual  accounts  taken  from  said 
books ; and  particularly  as  to  what  kind,  character  and  amounts  of 
items  were  included  under  the  name  of  '^Miscellaneous,'"  in  their  re- 
ports. 

Your  committee  found  that  their  system  of  bookkeeping  is  very 
simple  and  easily  understood,  and  at  the  same  time  most  thoroughly 
complete.  Your  committee  found  them  to  be  correct  with  one  ex- 
ception: that  of  the  “gross  earnings”  of  the  Cairo  wharfboat,  amount 
$191.66,  for  the  month  of  May,  1882,  was  omitted.  The  Auditor 
explains  this  error  or  omission  in  this  way:  that  the  assessors  had 
been  in  the  habit  of  listing  and  taxing  said  wharfboat  as  other  prop- 
erty until  1882,  and  that  the  company  did  not  know  but  they  would 
continue  to  do  so,  but  in  June  found  it  had  not  been  assessed,  and 
began  reporting  “gross  earnings”  on  the  same  from  June  1st,  instead 
of  May  1st.  The  Auditor  promises  to  make  this  correction  in  the 
next  semi-annual  report. 

We  found  the  item  on  their  report  to  the  State  termed  "Miscel- 
laneous,’’' to  include  the  “gross  earnings”  of  sleeping  cars,  rent  of 
property,  rent  of  tracks,  rent  of  docks,  storage,  dockage,  switching, 
Cairo  wharfboat,  and  train  news  agency,  and  that  these  items,  to- 
gether with  those  of  freight,  passenger,  mail  and  express,  constitute 
the  items  from  which  the  total  “gross  earnings”  of  the  Illinois  Cen- 
tral railroad  are  made  up;  and  that  they  have,  so  far  as  your  com-, 
mittee  was  able  to  learn,  no  other  sources  of  revenue  or  income. 


DIVISION  OF  EARNINGS  BETWEEN  MAIN  AND  AUXILIARY  LINES. 

Your  committee  finds  that  the  Illinois  lines  of  the  Illinois  Central 
proper  get  a prorate  per  mile  on  all  passenger  and  on  all  freight 
coming  off  of  their  lines  outside  of  the  State,  on  a mileage  basis, 
and  the  same  prorate  on  all  classes  of  business  on  their  auxiliary 
lines  in  the  State,  except  what  is  termed  “car  hauls”  to  Chicago, 
coming  off  of  the  Gilihan  & Springfield  and  the  Kankakee  & South- 
western lines  onto  the  Illinois  Central  proper.  On  “car  hauls,”  the 


7 


Oilman  & Springfield  allow  to  the  Central  proper,  from  Gilman  to 
Chicago,  an  arbitrary  or  agreed  rate  of  $8  per  car;  and  on  ‘‘car 
hauls”  the  Kankakee  & Southwestern  allow  the  Central  proper,  from 
Kankakee  to  Chicago,  an  arbitrary  or  agreed  rate  of  $6  per  car,  the 
same,  for  each,  being  about  one  cent  per  ton  per  mile  for  the  Cen- 
tral proper. 

This  question  of  “car  haul”  is  one  on  which  the  committee  had 
grave  doubts  as  to  its  justness  and  fairness,  compared  with  a due 
and  proper  regard  for  the  interests  of  the  State,  it  being  entitled  to 
7 per  cent  of  the  “gross  earnings”  of  the  Illinois  Central  railroad 
on  its  lines  in  Illinois,  as  provided  by  its  charter.  But,  after  the 
most  diligent  and  impartial  inquiry  and  careful  consideration,  your 
committee  have  concluded  that  the  fixed  “car  haul”  rate  of  $8  from 
Gilman  to  Chicago,  a distance  of  81  miles,  is  substantially  a fair 
and  just  proportionate  allowance  to  the  main  line  in  its  earnings ; 
and  that  a fixed  “car  haul”  rate  of  $6  is  a fair  and  just  propor- 
tionate allowance  from  Kankakee  to  Chicago,  a distance  of  56  miles. 

And  said  conclusion  is  based  upon  the  following,  among  other  rea- 
sons : 

First.  As  far  as  we  could  learn,  and  as  shown  by  the  testimony 
of  other  railroad  managers  who  have  no  interest  in  the  question,  it 
is  the  universal  rule  of  an  auxiliary  line  to  get  a much  larger  pro- 
portionate share  of  “car-haul”  rate  than  the  main  or  trunk  line, 
because  the  auxiliary  line,  or  “feeder,”  has  all  the  trouble  and  ex- 
pense of  originating  or  producing  the  freight;  they  perform  all  the 
station  service,  switching  and  train  service,  and  in  many  cases  only 
a short  haul ; whereas,  the  main  line  has  no  extra  train  service, 
station  service,  or  switching  service,  but  simply  adds  it  to  their 
regular  train,  and,  with  little  or  no  cost  to  them,  deliver  the  car  to 
its  destination.  I 

Second.  The  auxiliary  line  that  produces  the  business  must  and 
should  have  the  greater  per  cent,  proportionate  to  the  mileage,  for 
Ihe  reason  that  they  have  to  keep  up  their  track,  station  and  train 
service  with  a comparatively  small  volume  of  business ; whereas,  the 
main  line  requires  but  little,  if  any  extra  track,  train  or  station 
service,  to  carry  these  through  “car-hauls”  to  their  destination,  and, 
on  account  of  their  large  volume  of  business,  can  afford  to  do  it  at 
a less  rate. 

Third.  We  think  it  a fair  rate,  for  the  reason  that  other  roads 
offer  to  take  the  “car-hauls”  of  the  Gilman  and  Springfield  to  Chi- 
cago from  Gilman  at  a fixed  “car-haul”  of  $7  per  car,  and  we  think 
it  best  for  the  interests  of  the  Illinois  Central,  and  for  the  State,  that 
the  Illinois  Central,  proper,  should  accept  a “car-haul”  rate  of  $8 
per  car  for  Chicago,  than  to  let  the  Gilman  and  Springfield  “sell  its 
business”  at  Gilman  to  the  Wabash  at  $7  per  “car-haul.”  In  that 
event,  the  Illinois  Central,  proper,  would  lose  the  $8  per  car  on  that 
business,  and  consequently  the  State  lose  its  7 per  cent.,  or  56  cents 
on  each  car ; and  that  the  same  reasons  and  the  same  principle  ap- 
plies in  the  same  way  to  the  Kankakee  division. 

Fourth.  We  find,  from  investigation,  that  it  is  the  practical  ex- 
perience of  railroad  men,  that  these  auxiliary  lines  will  not  pay  op- 
erating expenses  and  interest  on  their  bonds  if  they  were  required  to 
do  business  with  trunk  or  main  lines  on  a strictly  pro  rata  mileage 
basis;  and  as  proof  of  this  fact,  we  call  attention  to  Exhibit  “C,” 


8 


as  a part  of  this  report,  showing  computations  on  the  results  of  op- 
erating the  Springfield  and  Kankakee  divisions  on  a strictly  pro  rata 
mileage  basis. 

The  next  question  which  your  committee  examined  very  carefully,, 
was  this : 

If  the  volume  of  business  has  almost  doubled  since  1871,  why  has  not 
the  '‘gross  earnings''  of  the  road  proportionately  increased  V 

The  answer  to  this  is,  that  we  find,  from  examination,  that  the 
tariff  rate  has  decreased,  in  a litTe  less  proportion  than  the  ton- 
nage or  volume  of  business  has  increased,  leaving  the  ‘‘gross  earn- 
ings” little  more  than  before,  although  they  do  a much  larger  bulk 
of  business.  We  find  that,  if  the  tariff  rate  had  been  kept  up  where 
it  was  in  1871,  with  the  increase  in  the  volume  of  business  from  that 
time  up  to  the  close  of  1882,  on  all  the  Illinois  Central  lines,  there 
would,  during  those  years,  have  been  an  increase  in  gross  earnings 
of  nearly  twenty  million  dollars  ($20,000,000).  (For  tabulated  state- 
ment of  mileage,  tonnage,  and  rate,  see  Exhibit  “A,”  which  is  a part 
of  this  report.)  On  the  Illinois  Central,  proper,  being  705J  miles,  or 
that  portion  in  Illinois  on  which  the  State  is  entitled  to  7 per  cent, 
of  gross  earnings,  we  find  that,  had  the  tariff  rate  of  1871  continued 
on  the  business  done  during  the  years  1877  to  1882,  inclusive,  there 
would  have  been  an  increase  in  the  gross  earnings  for  those  six 
years,  of  $11,303,089.68,  and  a difference  to  the  State  of  7 per  cent, 
on  that  amount,  or  $791, 2i 2.77.  For  a fuller  and  more  complete 
detail  statement  of  increase  of  tonnage  and  decrease  of  rate,  we- 
refer  you  to  Exhibit  “E,”  which  is  a part  of  this  report. 

SUGGESTIONS. 

Your  committee  would  suggest  that  in  the  future  the  Illinois  Cen- 
tral, in  making  their  reports  to  the  Governor,  should  show  the- 
amounts  actually  earned  and  received  from  each  and  every  source 
separately,  and  not  group  several  large  items  in  their  reports  under 
the  head  of  “Miscellaneous." 

And  without  finding  any  fault  with,  or  criticising  any  of  the  Gov- 
ernors of  the  past,  yet  your  committee  respectfully  suggest  that, 
owing  to  the  vast  amount  of  revenue  received  from  this  source,  that 
the  Governor  in  the  future  should  have  some  competent  person,  on 
behalf  of  the  State,  examine  and  verify  each  semi-annual  statement 
hereafter  made,  before  approving  the  same. 

In  conclusion,  it  is  but  justice  for  your  committee  to  say,  that 
the  officers  of  the  Illinois  Central  Eailroad  expressed  at  all  times  a 
ready  willingness -to  afford  the  committee  every  facility  for  obtain- 
ing any  information  within  their  possession. 

Respectfully  submitted  by 

Seth  F.  Crews,  Chairman. 
Henry  F.  Walker, 

Eobt.  B.  Kennedy, 

I.  N.  Pearson, 

Ben.  F.  Caldwell, 

Geo.  H.  Varnell, 

Revilo  Newton. 


9 


Thursday  evening,  April  2(>,  1S83,  at  a meeting  of  the  finance 
committee,  the  above  and  foregoing  report  was  submitted,  approved, 
and  ordered  reported  to  the  “House.” 

Seth  F.  Crews,  Chairman. 


Exhibit  A. — Tons  of  freight  carried  one  mile,  and  rate  per  ton  per  mile. 


• 

Year. 

Mileage. 

Tons  of  fr’ght 
carried  one 
mile. 

Rate  per 
ton  per 
mile. 

Deduction  in 
rate  applied 
to  tonnage  of 
each  year- 
year  1871 
as  basis. 

. 

1871 

1 

1107.66 

.0232 

1872  

1107.66 

272,290. 900 

.0215 

$462,894  53 

1878  

1107.66 

275, 803, 422 

.0219 

358, 544  44 

1874  

1107.66 

273, 559, 253 

.0208 

656,512  20 

1875 

1107.66 

284,650,911 

.0193 

1, 110, 138  55 

1876  

1107.66 

264,602,314 

.0179 

1, 402. 392  26 

1877  

1107  66 

249.345,941 

.0183 

1,221.795  11 

1878 

1255.80 

306, 345, 691 

.0164 

2,083,150  70 

1879 

1286.72 

335, 470, 860 

.0152 

2, 683, 766  88 

1880 

1.S20  35 

■ 381,288,482 

.0154 

2,974.0.50  16 

1881 

1920  35 

386,035,424 

.0152 

3,088,283  39 

1882  

1330.35 

417,792,652 

0141 

3,801,913  13 

Total  ..  

3,447,185.850 

$19,843,471  35- 

Exhibit  B. 

Lease  by  the  Kankakee  and  Southwestekn  Railroad  Company,  to  the  Illinois- 
Central  Railroad  Company. 

This  indenture,  made  this  first  day  of  August,  in  the  year  of  Our  Lord  One  Thousand 
Eight  Hundred  and  Eighty-one,  between  the  Kankakee  and  Southwestern  Railroad 
Company,  of  the  first  part,  and  the  Illinois  Central  Railroad  Company,  of  the  second 
part  : 

Whereas,  the  said  party  of  the  first  part  is  a body  corporate,  organized  under  and 
pursuant  to  the  laws  of  the  State  of  Illinois,  to  continue  for  the  term  of  fifty  years,  com- 
mencing on  the  twentieth  day  of  May,  A.  D.  1878,  with  the  right  of  extending  or  renewing 
its  charter  from  time  to  time,  in  such  manner  as  may  be  provided  by  law,  for  periods  not 
longer  than  fifty  years  : 

And  Whereas,  the  said  party  of  the  first  part  is  the  owner  of,  and  has  now  in  opera- 
tion, the  several  lines  of  railway  hereinafter  particularly  described  : 

And  Whereas,  at  the  annual  meeting  of  the  shareholders  of  the  said  Kankakee  and 
Southwestern  Railroad  Company,  held  at  its  office,  in  Chicago,  on  the  twenty-fifth  day  of 
May,  A.  D.  1881,  a resolution  was  passed  by  the  unanimous  vote  of  all  the  shareholders  of 
the  company,  consenting  to  the  said  railway  lines  and  other  property  of  the  corporation 
being  demised  in  the  manner  hereinafter  expressed  : 

Now  This  Indenture  Witnesseth,  that,  in  consideration  of  the  issue,  by  the  party 
of  the  second  part,  of  its,  the  said  second  party’s,  certain  one  thousand  registered  bonds, 
secured  by  the  deed  of  trust  hereinafter  mentioned,  for  the  sum  of  one  thousand  dollars 
each,  of  even  date  herewith,  payable  at  the  office  of  the  Treasurer  of  the  Illinois  Central 
Railroad  Company,  in  the  City  of  New  York,  on  the  first  day  of  August.  A.  D.  1921,  and 
bearing  interest  at  the  rate  of  five  per  centum  per  annum,  payable  half  yearly  on  the  first 
days  of  February  and  of  August  of  each  year,  until  the  principal  sum  shall  be  paid;  the 
said  bonds  to  be  issued  and  used  for  the  purposes  particularly  specified  in  the  deed  of 
trust  by  which  they  are  secured:  and  also,  in  consideration  of  the  covenants  and  condi- 
tions hereinafter  contained,  and  by  the  said  party  of  the  second  part  to  be  observed 
and  performed,  the  said  party  of  the  first  part  hath  demised,  leased  and  let.  and  doth  by 
these  presents  demise,  lease  and  let,  to  the  said  party  of  the  second  part,  the  several 
lines  of  railway  belonging  to  the  party  of  the  first  part,  situated  in  the  State  of  Illinois, 
and  described  as  follows  : 

First— A line  of  railway  extending  from  a point  on  the  line  of  the  Illinois  Central  Rail- 
road known  as  Otto  Station,  about  four  miles  south  of  the  Kankakee  river,  in  the  County 
of  Kankakee,  through  the  town  of  Chatsworth  in  the  County  of  Livingston,  to  Colfax: 
Station  in  the  town  of  Cropsey  and  County  of  McLean. 

■Second— k line  of  railway  extending  from  a point  on  the  last  mentioned  line  known  as 
Kempton  Junction,  in  Sullivan  Township  in  the  County  of  Livingston,  to  Kankakee  Junc- 
tion on  the  main  line  of  the  Illinois  Central  Railroad,  in  Minonk  Township  in  the  CountF 
of  Woodford: 


10 


Together  with  all  the  proposed  branches  and  extensions  of  said  lines  of  railway,  or 
either  of  them, .that  may  be  hereafter  constructed,  and  also  the  right  of  way,  road-bed  and 
tracks,  bridges,  fences,  sidings,  stations  and  station-grounds,  work-shops,  engine- 
houses,  warehouses,  elevators,  offices  and  other  property,  held,  acquired,  or  which  may 
be  hereafter  acciuired  for  use  in  connection  with  the  said  railways  or  the  business  thereof; 
and  also,  all  the  corponite  rights,  privileges  and  franchises  of  the  said  party  of  the  first 
part,  and  all  the  easements,  rights  and  things,  of  whatever  name  or  nature,  connected 
with,  or  relating  to,  the  stiid  railways  or  the  construction,  maintenance  or  use  thereof, 
together  with  all  and  singular,  the  tenements,  hereditaments  and  appurtenances  there- 
unto belonging,  or  in  anywise  appertaining,  and  the  reversions,  remainders,  tolls, 
incomes,  rents,  issues  and  profits  thereof. 

To  HAVE  AND  TO  HOLD  the  Said  railways,  and  railway  works,  and  other  property  and 
premises,  hereby  demised,  with  the  appurtenances,  unto  the  said  party  of  the  second 
part,  its  successors  and  assigns,  from  the  date  of  these  presents  to  the  end  of  the  char- 
tered existence  of  the  said  party  of  the  first  part,  and  during  the  extension  or  extensions, 
renewal  or  renewals,  or  the  corporate  rights  and  existence  of  said  party  of  the  first  part, 
as  hereinafter  provided,  subject,  nevertheless,  to  the  prior  lien  of  a certain  deed  of  trust 
executed  and  delivered  by  the  said  party  of  the  first  part  to  Lewis  V.  F.  Randolph  and 
Stuyvesant  Fish,  trustees,  bearing  even  date  with  these  presents,  and  made  to  secure  the 
payment  of  one  thousand  registered  bonds  of  the  same  date,  issued  by  the  Illinois  Central 
Railroad  Company,  and  payable  at  the  office  of  its  treasurer  in  the  City  of  New  York,  on 
the  first  day  of  August.  A.  D.  1921,  with  interest  thereon  at  the  rate  of  five  per  centum  per 
annum,  payable  half-yearly  on  the  first  days  of  February  and  of  August  in  each  succes- 
sive year;  to  which  said  deed  of  trust  reference  is  hereby  made  for  a more  full  and 
particular  description  thereof. 

And  the  said  party  of  the  first  part  hereby  covenants  and  agrees  with  the  said  party 
of  the  second  part,  that  during  the  continuance  of  this  lease  and  the  life  of  its  present 
charter,  it  will  maintain  its  corporate  organization  by  the  annual  election  of  directors 
and  officers,  and  the  performance  of  such  other  acts  as  may  be  required  by  law  for  that 
purpose;  and  that  at  or  before  the  expiration  of  its  present  charter,  at  the  request  of  the 
said  party  of  the  second  part,  its  successors  or  assigns,  it  will  cause  its  charter  to  be  re- 
newed and  extended  for  another  term  of  fifty  years,  or  for  such  other  period  as  may  at 
that  time  be  permitted  under  the  provisions  of  law  authorizing  such  extensions  or  re- 
newals, and  that  it  will  make,  execute  and  deliver  all  needful  papers  and  instruments, 
and  take  all  necessary  action  for  that  purpose,  and  that  it  will,  in  like  manner,  on  like 
request,  at  each  successive  expiration  of  its  charter,  renew  and  extend  the  same,  and  will, 
during  all  such  renewals  and  extensions  of  such  chartered  rights,  maintain  its  corporate 
organization,  so  as  in  effect  to  make  such  corporation  a permanent  and  continuing  one. 

And  the  said  party  of  the  first  part  further  covenants  and  agrees  that  it  will, upon  each 
successive  renewal  or  extension  of  its  said  charter,  as  hereinbefore  provided,  at  the  re- 
quest of  the  said  party  of  the  second  part,  its  successors  or  assigns,  and  without  any  new 
or  additional  consideration  to  be  given  therefor,  renew  and  extend  this  lease  so  as.  in 
effect,  to  make  the  said  lease  and  the  term  hereby  granted  to  the  said  party  of  the  second 
part,  continuous  and  perpetual. 

And  the  said  party  of  the  second  part,  in  consideration  of  the  premises,  doth  hereby 
•covenant  and  agree  with  the  said  party  of  the  first  part,  its  successors  and  assigns,  to  take 
possession  of  the  property  hereby  demised,  and  during  the  continuance  of  this  lease  and 
all  renewals  thereof,  to  pay,  or  cause  to  be  paid,  all  taxes  and  assessments  that  may  be 
lawfully  levied,  charged  or  assessed  on  said  demised  premises,  or  any  part  thereof,  and 
also  at  all  times  to  keep  the  said  railways  and  works  hereby  demised  in  good  order  and 
repair  and  suitably  equipped,  and  to  maintain  and  work  the  same,  in  such  manner  as  may 
be  necessary  to  reasonably  accommodate  the  business  of  the  country  through  which  the 
said  railways  pass,  and  to  fully  answer  the  demands  of  the  said  business;  and  further,  to 
indemnify  the  said  party  of  the  first  part  against  all  liabilities,  claims  and  demands  what- 
soever, incurred  in  the  management  and  operation  of  said  railways  and  works,  during  the 
continuance  of  this  lease  and  all  renewals  thereof. 

And  the  party  of  the  second  part  further  covenants  and  agrees  that  it  will  punctually 
pay  the  principal  and  interest  of  the  said  one  thousand  bonds,  secured  by  the  deed  of 
trust  hereinbefore  mentioned,  as  the  same  shall  mature,  and  that  it  will  indemnify  the 
said  party  of  the  first  part  against  all  loss,  charges  and  expense  that  may  be  incurred  or 
sustained  in  consequence  of  the  execution  and  delivery  of  the  aforesaid  deed  of  trust 
made  to  secure  payment  of  the  said  bonds. 

And  it  is  mutually  covenanted  and  agreed  that  the  net  earnings  and  income  of  each 
separate  year,  during  the  continuance  of  this  lease,  derived  by  the  party  of  the  second 
part  from  the  use  and  operation  of  the  railways  hereby  demised,  alter  t)ayment  of  the 
ordinary  operating  expenses,  repairs  and  taxes,  shall  constitute  a fund  which  is  hereby 
pledged  for  the  payment  of  the  annual  interest  maturing  during  that  particular  year  upon 
the  aforesaid  bonds,  or  so  many  of  them  as  shall  at  any  time  be  and  remain  outstanding. 
If  in  any  year  the  said  net  earnings  and  income  shall  exceed  the  amount  required  to  pay 
the  maturing  interest  of  that  year.the  surplus  may  be  appropriated  and  applied  by  the  said 
party  of  the  second  part  to  other  and  general  uses,  and  the  entire  fund  derived  in  any 
year  from  the  use  and  operation  of  the  said  railways  may  be  likewise  appropriated  and  ap- 
plied by  the  said  party  of  the  second  part,  if  the  interest  maturing  during  that  year  shall 
have  been  fully  paid.  And  for  the  purpose  of  establishing  certain  fixed  and  definite  rules, 
to  be  observed  in  ascertaining  and  determining  the  amount  of  the  said  annual  earnings 
and  income,  it  is  hereby  mutually  agreed  that  for  the  two  years  next  ensuing  the  date  of 
this  indenture  the  gross  charges  or  receipts  on  all  through  freight  traffic  to  and  from  the 
city  of  Chicago  and  any  point  or  points  on  the  railway  lities  hereby  demised,  shall  be 
divided  and  apportioned  between  the  said  Illinois  Central  railroad  proper  and  the  said 
leased  lines,  as  follows:  For  every  ear  load  of  20,000  pounds  received  from  or  delivered  to 
the  said  leased  lines  at  Otto  Station,  the  Illinois  Central  railroad  proper  shall  be  allowed 
at  the  rate  of  six  dollars  per  car  load;  and  for  all  quantities  less  than  a car  load  received 
from  or  delivered  to  the  said  leased  lines  at  Otto  Station,  the  said  Illinois  Central  railroad 


11 


proper  shall  be  allowed  at  the  rate  of  twelve  cents  per  100  pounds.  The  remainder  of  said 
gross  earning  on  such  through  traillc  to  and  from  Chicago  shall  be  allowed  and  credited 
to  the  said  railway  iines  hereby  demised.  And  it  is  further  mutually  agreed  that  at  the 
expiration  of  the  said  term  of  two  years  above  mentioned,  and  as  often  as  once  in  every 
two  years  thereafter  during  the  continuance  of  this  lease,  a new  apportionment  of  the  said 
gross  charges  or  receipts  on  all  through  freight  traillc  between  Chicago  and  the  several 
stations  on  the  said  leased  lines,  shall  be  made  between  the  said  Illinois  Central  railroad 
proper  and  the  said  leased  lines,  by  two  disinterested  referees  versed  in  railway  manage- 
ment, to  be  chosen  by  the  parties  to  this  instrument,  who  shall  be  governed  in  making 
said  apportionment  by  ihe  same  considerations  as  would  Influence  or  control  their  judg- 
ment if  the  said  leased  lines  were  operated,  managed  and  controlled  by  an  independent 
company  entirely  distinct  from  the  said  Illinois  Central  Railroad  Company.  The  appor- 
tionments so  from  time  to  time  made  by  such  referees  shall  be  binding  upon  the  parties 
hereto,  and  shall  be  faithfully  observed  and  adhered  to,  until  superseded  by  a new  appor- 
tionment made  as  herein  provided. 

It  is  further  mutually  covenanted  and  agreed,  that  in  case  this  lease  shall  be  termi- 
nated at  any  time,  for  any  cause,  whether  by  its  own  limitation  or  otherwise,  the  said 
first  party,  before  it  shall  be  entitled  to  the  possession  of  the  said  demised  premises,  or 
any  part  thereof,  shall  repay  to  the  said  second  party  the  full  amount  of  all  bonds  secured 
by  said  deed  of  trust  hereinbefore  mentioned,  which  shall  have  been  issued  by  the  party 
of  the  second  part  in  conformity  thereto,  and  in  addition  thereto,  the  original  cost  of  all 
additional  construction  and  new  work  on  said  demised  premises,  and  of  all  permanent 
improvements  thereon  made  by  the  said  party  of  the  second  part;  and  as  a security  for 
the  payment  of  the  aforesaid  sums  of  money,  said  party  of  the  second  part  shall  have  a 
lien  upon  the  said  demised  premises,  which  shall  entitle  it  to  the  possession  and  use 
thereof,  and  to  the  revenues  to  be  derived  therefrom,  until  the  same  shall  bo  paid. 

And  the  said  party  of  the  first  part  also  covenants  and  agrees,  that  it  will  at  any  time 
or  times,  at  the  request  and  cost  of  the  said  party  of  the  second  part,  make,  do  and  exe- 
cute every  such  act,  deed  or  assurance,  for  more  effectually  demising  the  railway  works 
and  premises  hereby  demised,  or  intended  so  to  be,  or  any  part  thereof,  unto  the  said 
party  of  the  second  part,  its  successors  and  assigns,  according  to  the  true  intent  and 
meaning  of  these  presents,  as  by  the  said  party  of  the  second  part,  its  successors  or  as- 
signs, or  its  or  their  counsel  learned  in  the  law,  shall  be  reasonably  advised  and  required. 

In  Witness  Whereof,  the  parties  hereto  have  caused  their  several  corporate  seals  to 
be  hereunto  affixed,  and  these  presents  to  be  subscribed  by  their  respective  presidents 
and  secretaries,  the  day  and  year  first  above  written. 

THE  KANKAKEE  AND  SOUTHWESTERN  RAILROAD  COMPANY. 

By  W.  K.  Ackerman,  its  President. 

Wm.  J.  Mauriac,  Secretary, 

ILLINOIS  CENTRAL  RAILROAD  COMPANY. 

By  W.  K.  Ackerman,  its  President. 

D-uthth,  Asst.  Secretary. 


STATE  OF  ILLINOIS, 
Cook  County. 


I,  Peter  Daggy,  Notary  Public  in  and  for  the  said  county,  certify  that  William  K.  Ack- 
erman, President  of  the  Kankakee  and  Southwestern  Railroad  Company,  and  William  J. 
Mauriac.  Secretary  of  said  company,  both  of  whom  are  personally  known  to  me  to  be  the 
same  persons  whose  names  are  subscribed  to  the  foregoing  instrument,  and  who  are  also 
known  to  me  to  be  respectively  the  president  and  secretary  of  the  said  Kankakee  and 
Southwestern  Railroad  Company,  appeared  before  me  this  day  in  person  and  severally 
acknowledged  that  they  signed,  sealed  and  delivered  the  said  instrument  as  the  free  and 
voluntary  act  of  the  said  Kankakee  and  Southwestern  Railroad  Company  for  the  uses  and 
purposes  therein  set  forth.  And  the  said  William  J.  Mauriac,  being  by  me  duly  sworn, 
said,  that  he  resided  in  the  city  of  Chicago,  and  was  the  secretary  of  the  said  Kankakee 
and  Southwestern  Railroad  Company;  that  he  knew  the  corporate  seal  of  the  said  com- 
pany, and  that  the  seal  affixed  to  the  foregoing  instrument  was  such  corporate  seal;  that 
it  was  so  affixed  by  order  of  the  board  of  directors  of  the  said  company,  and  that  he 
signed  his  name  thereto  by  the  like  order  as  secretary  of  the  company:  and  the  said 
William  J.  Mauriac  further  said  that  he  was  acquainted  with  William  K.  Ackerman,  and 
knew  him  to  be  the  president  of  the  said  company;  that  the  signature  of  the  said  William 
K.  Ackerman,  subscribed  to  the  said  instrument,  was  in  the  genuine  handwriting  of  the 
said  William  K.  Ackerman,  and  was  thereto  subscribed  by  the  like  order  of  the  said  board 
of  directors  and  in  the  presence  of  him,  the  said  William  J.  Mauriac. 

Given  under  my  hand  and  notarial  seal  this  first  day  of  August,  A.  D.  1881. 

P.  DAGGY,  Notary  Public, 


12 


Exhibit  C. 


Results  of  ojiemting  Chicago 


and  Springfield  Railroad. 


PEO  EATE  BASIS. 


Year. 

Earnings. 

Operating 
expenses 
and  taxes. 

Interest  on 
bonds. 

Total  expen- 
ses. including 
interest. 

Net  results. 

1878 

$210, 724  75 
225,960  54 
298, 958  97 
269,826  99 
290, 170  93 

$181,094  57 
172,558  02 
243, 088  45 
206, 433  60 
239,777  44 

$96, 000  00 
96,000  00 
96,000  00 
96,000  00 
96, 000  00 

$277, 094  57 
268,558  02 
339, 088  45 
302,433  60 
aS5. 777  44 

$66,369  82 
42,597  48 
40, 129  48 

32. 606  61 

45.606  51 

Loss 

1879 

1880 

1881 

1882 

Total 

Average  for  5 years 

$1,295,642  18 

$1,042,952  08 

$480, 000  00 

$1,522,952  08 

$227,309  90 

“ 

259, 128  43 

208,590  40 

96, 000  00 

304, 590  41 

45,461  98 

‘ ‘ 

Results  of  operatmg  Kankakee  and  Southeastern  Railroad. 

PEO  EATA  BASIS. 


Earnings. 

Operation 
expenses 
and  taxes. 

Interest 

charged. 

Total  expen- 
ses, including 
interest. 

Net  results. 

Average,!  years. . . 

. $131,311  04 

$115,452  35 

$30,435  63 

$145, 888  24 

$14,577  20 

Loss- 

{ 


I 

1 

i 


I 


/ 


r 


I 


\ 


13 


14 


Exhibit  E. — Tons  of  jreight  carried  one  mile,  and  rate  'per  ion  per 
mile,  Illinois  Central  proper. 


Year. 

Mileage. 

Tons  of  fr’ght 
carried  one 
mile. 

Rate  per 
ton  per 
mile. 

Reduction  in 
rate  applied 
to  tonnage  of 
each  year— 
Year  1871  as 
basis. 

.0232 

1877  

705.5 

168,459,369 

.0180 

$875,988  72 
1,2.33,006  22 
2,033,399  8.3 
2, 0.39, 076  29 
2,26.3,709  72 
2. 857, 908  90 

1878  

705.5 

189, 693,265 

.0167 

705.5 

228,471,891 

.0143 

1880  

705.5 

245, 671,842 

.0149 

1881  

705.5 

257,239, 741 

.0144 

1882  

705.5 

282,961,278 

.0131 

Total 

$11,303,089  63 

Tons  of  freight  carried  one  mile,  and  rate  per  ton  per  mile,  Illinois: 

Central  proper. 


Year. 

Mileage. 

Tons  of  fr’ght 
carried  one 
mile. 

Rate  per 
ton  per 
mile. 

Reduction  in 
rate  applied 
to  tonnage  of 
each  year— 
Year  1877  as 
basis. 

1877  

.0180 

1878  

705.5 

189,693,265 

.0167 

$246,601  2.S 

1879  

705.5 

228,471,891 

. .0143 

845,346  00 

1880  

705.5 

245,671,842 

.0149 

761,582  70 

1881  

705.5 

257,239,741 

.0144 

1,183,302  30- 

1882 - 

705.5 

282,961,278 

.0131 

1,386,510  25 

Total ... ...... 

$4,423,342  50 

Exhibit  F*. — Statement  of  Gross  Eamiings  in  Illinois  for  the  six  months 

ending  April,  1878. 


Month. 

Freight. 

Passeng’r. 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

November  

$274, 978  75 

$82, 821  15 

$8, 295  14 

$7,839  00 

$22,995  71 

$396,929  75 

December  

233,714  42 

93,867  90 

8,295  14 

7,839  00 

23, 609  26 

367,325  72 

January 

276,347  34 

78,768  14 

8,295  14 

10,935  00 

22,188  71 

.396,534  33 

Febr'isiry  

199, 896  36 

71,853  61 

8,295  34 

5, 640  00 

25,639  99 

311,325  30 

Mareb  

218,896  89 

81,677  66 

8,295  23 

8, 450  00 

24,483  10 

341,802  88- 

April 

225,658  76 

82,333  98 

8, 295  24 

8,644  80 

21,571  23 

346,504  01 

Total 

$1,429,492  52 

$491,322  44 

$49,771  23 

$49, 347  80 

$140,488  00 

$2,160,421  99 

Recapitulation. 


Freight  earnings 

Passenger  earnings 

Mail  earnings 

Express  earnings 

Miscellaneous  expenses. 


$1,429,492  52 
491,822  44 
49,771  2.8 
49,347  80 
140,488  00 


Total 

i^even  per  cent,  upon  which  is, 


$2,100,421  99 
$151,229  54 


15 


STATE  OF  ILLINOIS,  I _ 

Cook  Co.,  Chicago,  f 

John  C.  Welling  being  duly  sworn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois Central  Railroad  Company  in  Illinois,  and  that  said  company  has  no  secretary  in 
said  State,  and  that  this  affiant  further  states  the  foregoing  statement  of  gross  earnings, 
derived  from  said  road  for  the  six  months  ending  Aprd  :iii,  1878,  i.s  a correct  abstract  and 
statement  from  the  books  and  accounts  of  said  company. 

Signed.  J.  C.  WELLING. 

Subscribed  and  sworn  to  before  me  this  5th  day  of  June,  1878. 

[Seal.]  BERNT  MOE,  Notary  Public. 


Exhibit  G. — Statement  Showing  Gross  Earnings  in  Illinois  for  the  six 
months  ending  October  81,  1878. 


Months. 

Freight. 

jpasseng  ’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

May I 

$267, 197  70 
242, 192  50 
272,043  58 

$66,481  71 
74. 016  00 

$8, 295  24 

$11,025  95 

$22,498  80 
23, 163  42 
21,005  30 
21, 226  62 
22,221  33 
24,998  04 

$375,499  40 
355,792  15 
383,903  74 
474,710  13 

June 

8,295  23 

8. 125  00 

.Tilly 

71,410  37 
81,413  11 

7, 746  20 

11,697  99 

August  

354, 888  35 

7,914  81 

9,267  24 

September 

272,099  78 

98,011  90 
88,490  88 

8, 105  99 
8,201  55 

8, 940  26 

409.379  26 
417,889  13 

October 

287,423  66 

8,775  00 

Total 

$1,695,845  87 

$479, 823  97 

$48,559  02 

$57,831  44 

$135,113  51 

$2,417,173  81 

Recapitulation. 


Freight  earnings $1,695,845  87 

Passenger  earnings 479,823  94 

Mail  earnings 48,559  02 

Express  earnings. 57,831  44 

Miscellaneous  earnings 135,113  51 


Total $2,417,173  81 

Seven  per  cent,  upon  which  is $169,202  17 


STATE  OF  ILLINOIS,  I 
Cook  Co.,  Chicago. 

John  C.  Welling,  being  duly  sworn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois Central  Railroad  Company,  and  that  said  company  has  no  secretary  in  said  State, 
and  that  this  affiant  further  states  that  the  foregoing  statement  of  gross  earnings  derived 
from  said  road  for  the  six  months  ending  31st  October,  1878,  is  a correct  abstract  and  state- 
ment from  the  books  and  accounts  of  said  company.  Signed,  J.  C.  WELLING. 

[Seal.1  Subscribed  and  sworn  to  before  me  this  30th  day  of  November,  1878. 

BERNT  MOE,  Notary  Public. 


Exhibit  H. — Statement  of  Gross  Earnings  in  Illinois  for  the  six  months 

ending  April  30,  1879. 


Months. 

Freight. 

Passeng.’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

November 

December 

January 

February 

March 

April 

Total 

$289, 055  43 
268,496  16 
275. 135  87 
214,076  14 
220, 819  33 
204, 446  81 

$72,751  81 
69,512  50 
65,516  31 
60,545  80 
76,496  46 
72, 073  37 

$8, 199  48 
8,201  55 
8,201  56 
8,201  56 
8,201  55 
8, 201  56 

$8,450  00 
8,450  00 
8,775  00 
7,800  00 
8,489  78 
8,450  00 

$27,437  44 
28, 485  92 
29,048  40 
21,843  61 
20, 452  39 
21,870  09 

$405,894  16 
383,109  13 
386,677  IJ 
312,467  11 
:>34, 459  51 
315,041  83 

$l,47L992  74 

$416,896  25 

$49, 207  26 

$50, 414  78 

$149, 137  85 

$2,137,648  88 

Recapitulation. 


Freight  earnings $1,471,992  74 

Passenger  earnings 416,896  25 

Mail  earnings 49,207  26 

Express  earnings 50,414  78 

Miscellaneous 149, 137  85 

Total $2,137,648  88 

Seven  per  cent,  upon  wnich  is $149,635  42 


16 


STATE  or  ILLINOIS,  i 
Cook  Co.,  Chicago,  f 

John  C.  WoIlin^^,  boinj?  duly  sworn,  states  upon  oath  iliat  he  is  the  Auditor  of  the  Illi- 
nois Central  llailroad  Company  in  Illinois,  and  that  said  company  has  no  secretary  in  said 
State,  and  that  this  affiant  further  states  that  the  foregoing  statement  of  gross  earnings 
derived  from  said  road  for  the  six  months  ending  lioth  April,  1879,  is  a correct  abstract  and 
statement  from  the  books  and  accounts  of  said  company.  Signed,  J.  C.  WELLING. 

ISeah.  I Subscribed  and  sworn  to  before  me  this  2«th  day  of  June,  1879. 

JESSE  W.  OTT,  Notary  Public. 


Exhibit  J. — Statement  of  Gross  Earnings  in  Illinois  for  the  six  months 
ending  October  31,  1879. 


Months. 

Freight. 

Passeng  ’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

May 

$248,972  58 
261,445  26 
269,831  41 
•284,325  74 
333,542  00 
361 , 9‘i5  36 

$65,696  85 
69,658  71 
80,568  93 
84.946  84 
100,426  81 
102,935  19 

$8,201  55 
8,201  55 
8,201  55 
8,201  56 
9, 842  82 
8,748  65 

$12,546  18 
9, 953  56 
9, 199  57 
8,744  15 
8,471  75 
8,775  00 

$20,479  06 
23,024  26 
26,370  65 
22, 362  30 
21,905  12 
24,523  11 

$355, 896  22 
372, 283  34 
394,172  12 
608,580  59 
474,188  50 
506, 907  31 

June 

July  

AllgUKt 

September 

October 

Total 

$1,760,042  35 

$504,233  33 

$51,397  69 

$57, 690  21 

$138,664  50 

$2,512,028  08 

Recapitulation. 


Freight  earnings $1,760,042  35 

Passenger  earnings 504,233  33 

Mail  earnings • 51,397  69 

Express  earnings 57, 690  21 

Mii-cellaneous  earnings 138,664  50 

Totai $2,512,028  08 

Seven  per  cent.  (7%)  upon  which  is $175,841  96 


STATE  OF  ILLINOIS, 

Co  K Co.,  Chicago,  j 

J(dm  C.  Welling,  being  duly  sworn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois Central  Railroad  Company  in  Illinois,  and  that  said  company  has  no  secretary  in  said 
State,  and  that  this  affiant  further  states  that  the  foi  egoing  statement  of  gross  earnings 
derived  from  said  road  for  the  six  monthsending  31  October,  1879,  is  a correct  abstract  and 
statement  from  the  books  and  accounts  of  said  company.  Signed,  J.  C.  WELLING. 

[Seal.]  Subscribed  and  sworn  before  me  this3d  day  of  December,  1879. 

JESSE  W.  OTT,  Notary  Public. 


Exhibit. K. — Statement  of  Gross  Receipts  in  Illinois  for  six  months 
ending  April  30,  1880. 


Month. 

Freight. 

Passeng’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

November,  1879 

December,  187!> 

January,  1880 

February,  1880  

March,  1880 

April,  1880 

Total 

$280, 037  36 
307,968  17 
260,939  35 
286,304  28 
245, 856  32 
225,277  94 

$84,461  63 
84,275  76 
82,619  61 
74,104  79 
83, 936  71 
77,476  73 

$8,748  64 
8,748  64 
8,748  65 
8, 748  65 
8,748  63 
8, 748  65 

$8,424  08 
8,934  47 
8,866  44 
8, 132  30 
9,576  01 
10,093  41 

.$29,071  77 
28,527  87 
27,958  84 
28, 622  41 
28, 126  29 
26,311  06 

$410,743  48 
438, 454  91 
389, 132  89 
405,912  43 
376,243  96 
347, 907  79 

$1,606,383  42 

$486,875  23 

$52, 491  86 

$54, 026  71 

$168,618  24 

$2,368,395  46 

Recapitulation. 


Freight $1,606,383  42 

Passenger 486.875  23 

Mail • 52,491  86 

Express 54,026  71 

Miscellaneous 168,618  24 


Total $2,368,395  46 

Seven  per  cent,  upon  which  is $165,787  68 


STATE  OF  ILLINOIS.  / „„ 

Cook  Co.,  Chicago. 

Jno.  (’.  WellintJ,  bein^  duly  sworn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois Central  Railroad  Company,  and  that  said  company  has  no  secretary  in  said  State; 
and  this  affiant  further  states  that  the  foretjoing  statement  of  sross  earnings  derived  from 
said  road  for  the  six  months  ending  April  au,  1880,  is  a correct  abstract  and  statement  from 
the  books  and  accounts  of  said  company. 

Signed, 

, J.  C.  WELLING. 

Subscribed  and  sworn  to  before  me  this  12th  day  of  July,  1880. 

Signed, 

JOHN  DUNN,  Notary  Public. 


Exhibit  L. — Statement  of  Gross  Receipts  in  Illinois  for  six  months 
ending  October  31,  1883. 


Month. 

Freight. 

Passeng’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

May 

June 

July 

August 

September 

October 

Total 

$293, 416  27 
305,216  12 
334, 642  99 
332, 833  09 
342,496  25 
385,982  10 

$74, 876  62 
86,537  66 
92.349  88 
105,860  86 
121,639  32 
119,213  00 

$8, 748  64 
8,748  63 
8,878  17 
8,878  17 
8,878  16 
8,878  17 

$11,912  61 
11,398  35 
11,139  48 
8.662  43 
8,450  00 
8,450  00 

$30,491  32 
29,117  39 
33, 070  81 
31,282  84 
30,224  41 
31,454  53 

$419,445  46 
441,018  15 
480,081  as 
487,517  39 
511,688  14 
553,977  80 

$1,994,586  82 

$600,477  34 

$53, 009  94 

$60, 012  87 

$185,641  30 

$2,893,728  27 

Recapitulation. 


Freight $1,994,586  82 

Passenger 600,477  34 

Mail 53, 009  94 

Express 60, 012  87 

Miscellaneous 185,641  30 


Total $2,893,728  27 

Seven  per  cent,  of  which  is $202,560  98 


STATE  OF  ILLINOIS,  < ' 

Cook  Co.,  Chicago, 

John  C.  Welling,  being  duly  sworn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois Central  Railroad  Company,  and  that  said  company  has  no  secretary  in  said  State; 
and  this  affiant  further  states  that  the  foregoing  statement  of  gross  earnings  derived  from 
said  road  for  the  six  months  ending  October  31, 1880,  is  a correct  abstract  and  statement 
from  the  books  and  accounts  of  .“aid  company. 

Signed, 

J.  C.  WELLING. 

Subscribed  and  sworn  to  before  me  this  22d  day  of  December,  1880. 

Signed, 

JOHN  DUNN,  Notary  Public. 


Exhibit  M. — Statement  of  Gross  Receipts  in  Illinois  for  six  months 
ending  April  30,  1881. 


Month. 

Freight. 

Passeng’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

November,  1880 

December,  1880 

January,  1881.. 

February.  1881 

March,  1881 

April,  1881 

Total 

$353,536  59 
304,871  42 
■284,689  94 
260, 305  08 
250, 192  03 
287,636  24 

$88,483  77 
81,575  70 
82,633  52 
69,952  16 
79, 239  70 
88,058  97 

$8,878  19 

8.878  16 

8. 878  17 

8.878  16 
8, 878  16 
8,878  17 

$8, 747  79 
8,991  35 
8,522  09 
7, 900  19 
8,806  51 
11,107  32 

$28,622  12 
30. 752  28 
3S.740  27 
25. 355  51 
33,698  53 
26, 658  13 

$488,268  46 
435, 068  91 
418,463  99 
376,391  10 
380,814  93 
422,338  83 

$1,741,231  30 

$489, 943  82 

$53,269  01 

$54, 075  25 

$178,826  84 

$2,517,346  22 

—2 


18 


Recapitulation. 


Freight $1,741,231  30' 

Passenger 489,943  82' 

Mail 53,269  01 

Express 54,075  25^ 

Miscellaneous 178,826  84 

Total $2,517,346  22' 

Seven  percent,  of  'which  is $176,214  24 


STATE  OP  ILLINOIS,  I 
Cook  Co.,  Chicago,  f ^ 

John  C.  Welling,  being  duly  s-worn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois  Central  Railroad  Company,  and  that  said  company  has  no  secretary  in  said  Stater 
and  this  affiant  further  states  that  the  foregoing  statement  of  gross  earnings  derived  from 
said  road  for  the  six  months  ending  April  30,  1881,  is  a correct  abstract  and  statement  from 
the  books  and  accounts  of  said  company. 

Signed, 

J.  C.  WELLING. 

Subscribed  and  sworn  to  before  me  this  22d  day  of  June,  1881. 

Signed, 

JOHN,  DUNN,  Notary  Public. 

Exhibit  N. — Statement  of  Gross  Receipts  in  Illinois  for  six  months 
ending  October  31,  18S1. 


Months. 

Freight. 

Passeng’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

May 

June 

July 

August 

September 

October 

Total 

$298,161  12 
348,39^  57 
284,676  59 
381, 246  77 
35'2,070  16 
340,916  68 

$85, 089  38 
96,226  69 
113,606  70 
119,441  87 
131,774  36 
126,515  59 

$8,878  17 
10, 120  71 
9,085  26 
9, 085  25 
8, 757  78 
9,085  26 

$12,223  80 
9, 456  70 
88,839  12 
8,775  00 
v8,805  54 
8,755  94 

$33,644  16 
29,200  99 
25. 939  01 
21,457  23 
33,845  11 
42, 615  22 

$137,996  63- 
493,398  66 
442, 146  68 
540,006  12 
535, 252  95 
527,888  69^ 

$2,976,689  73: 

$2, 005, 464  89 

$672,654  59 

$55,012  43 

$56,856  10 

$186,701  72 

Recapitulation. 


Freight $2,005,464  89 

Passenger 672,654  59 

Mail, 55,012  43 

Express 56,856  10 

Miscellaneous 186,701  72 


Total $2:976,689  7a 

Seven  per  cent,  is $208,368  28 


STATE  OF  ILLINOIS  Uo 
Cook  Co.,  Chicago.  P * 

John  C.  Welling,  being  duly  sworn,  states  upon  oath  that  he  is  Auditor  of  the  Illinois 
Central  Railroad  Company,  and  that  said  company  has  no  secretary  in  said  State;  and  this 
affiant  further  states  that  the  foregoing  statement  of  gross  earnings  derived  from  said 
road  for  the  six  months  ending  October  31,  1881,  is  a correct  abstract  and  statement  from 
the  books  and  accounts  of  said  company.  (Signed,)  J.  C.  WELLING. 

[SEALl  Subscribed  and  sworn  to  before  me  this  7th  day  of  December,  1881. 

JOHN  DUNN,  Notary  Public. 

Exhibit  0. — Statement  of  Gross  Receipts  in  Illinois  for  six  months 

ending  April  30,  1882. 


Months, 

Freight. 

Passeng’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

November,  1881 

December,  1881 

January,  1882 

February,  1882 

March,  1882 

April,  1882 

Total 

$325, 731  37 
304,448  01 
309, 747  23 
293,256  24 
272, 036  37 
270,577  46 

$105, 162  33 
111, 084  93 
106,064  02 
98.031  30 
105, 877  82 
101,376  76 

$9, 085  26 
9, 085  26 

9.085  26 

9. 085  26 

9. 085  26 
9, 030  68 

$9, 0.36  61 
9,030  89 
9, 917  93 
8, 455  33 
9,574  96 
9. 109  53 

$21,059  88 
28,334  19 
40, 246  52 
26,328  81 
30,039  05 
22. 478  65 

$470,075  45- 
461,983  28 
475, 0()0  96 
435. 156  94 
426,613  46 
412,573  08 

$1,775,796  68 

$627,597  16 

1 

$54,456  98 

$55, 125  25 

$168,487  10 

$2,681,463  17 

t 


19 


Recapitulation. 


Freight $l.775.79(i  (1^ 

* Passenger (i27,597  1(5 

Mail.... 5l,45(i98 

Express 55, 125  2.'3 

Miscellaneous 108,487  10 


Total $2,081,463  17 

Seven  per  cent,  is $187, 702  42 


STATE  OF  ILLINOIS,  I 
Cook  Co.,  Chicago, 

John  C.  Welling,  being  duly  sworn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois Central  Railroad  Company,  and  that  said  company  has  no  secretary  in  said  State; 
\ and  this  affiant  further  states  that  the  foregoing  statement  of  gross  earnings  derived  from 

K said  road  for  the  six  months  ending  April  30,  1882,  is  a correct  abstract  and  statement  from 

the  books  and  accounts  of  said  company.  (Signed,)  J,  C.  WELLING. 

[SEAL]  Subscribed  and  sworn  to  before  me  this  2d  day  of  June,  1882. 

JOHN  DUNN,  Notary  Public. 


Exhibit  P. — Statement  of  Gross  Receipts  in  Illinois  for  six  months 
ending  October  31,  1882. 


Months. 

Freight. 

Passeng’r 

Mail. 

Express. 

Miscella- 

neous. 

Total. 

May 

June 

July 

August 

September 

October 

Total 

$269,699  73 
256,704  15 
345,103  13 
380,910  60 
338,807  79 
3.56,944  92 

$98,426  24 
103, 099  37 
120,693  88 
121,692  99 
137,705  70 
142, 958  76 

$9,085  26, 
9,156  52 
9,295  15 
9, 132  07 
9, 132  07 
9, 132  07 

$12, 482  30 
15, 042  63 
15,397  78 
13, 133  99 
9,531  45 
8,471  19 

$26, 685  20 
24, 409  45 
26.584  55 
35,608  87 
30,569  21 
29,876  78 

$416,378  73 
409,072  12 
517,074  49 
.560,479  12 
525, 806  82 
547,384  32 

$1,948,290  32 

$724,576  94 

$54, 934  94 

.$74,659  34 

$173, 734  06 

$2,976,195  00 

Recapitulation. 


Freight .* .$1,948,290  32 

Passenger '. 724,570  94 

Mail 54,934  94 

Express 74,059  .34 

Miscellaneous, 173,731  00 


Total $2,976,195  00 

Seven  per  cent,  is 208,333  09 


STATE  OF  ILLINOIS,  1 „„ 

Cook  Co.,  Chicago,  f 

John  C.  Welling,  being  duly  sworn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois Central  Railroad  Company,  and  that  said  Company  has  no  secretary  in  said  State; 
and  this  affiant  further  states  that  the  foregoing  statement  of  gross  earnings  derived  from 
said  road  for  the  six  months  ending  October  31, 1882,  is  a correct  abstract  and  statement 
from  the  books  and  accounts  of  said  company.  (Signed,)  J,  C.  WELLING. 

f [seal!  Subscribed  and  sworn  to  before  me  this  1st  day  of  December,  1882. 

JOHN  DUNN,  Notary  Public. 


TESTIMONY. 

TESTIMONY  OF  EX-GOVERNOR  S.  M.  CULLOM. 

When  I came  into  the  office  of  Governor,  in  1877,  I made  inquiry 
at  once  in  reference  to  the  condition  of  the  Illinois  Central  Eailroad, 
and  talked  with  the  president  of  the  company  as  to  their  manner 
of  doing  business,  so  far  as  related  to  the  interest  of  the  State.  In 
June,  1879,  finding  that  it  was  impracticable  for  me  to  attend  the 
meetings  of  the  board  of  directors  in  New  York,  and  learning  that 


20 


it  was  the  custom  of  my  predecessors  to  appoint  proxies — the  law 
providing  that  the  Governor  should  be  ex-officio  a director,  and 
could  attend  the  meetings  by  ’person  or  by  proxy — I appointed  Mr. 
Osborne  as  proxy,  with  another  gentleman  who  was  connected  with 
the  road  as  alternate.  In  the  meantime,  however,  I visited  the  rail- 
road offices  in  Chicago,  three  or  four  times ; talked  with  the  presi- 
dent and  auditor,  and  looked  at  their  books  and  satisfied  • myself 
by  such  inquiries  and  examination  as  I could  personally  make,  that 
their  dealings  with  the  State  were  entirely  honest  and  straightfor- 
ward. Before  my  first  term  as  Governor  expired,  however,  I re- 
ceived a communication  from  a private  citizen  in  Chicago,  stating 
that  he  had  a claim  which  he  was  unable  to  settle,  and  wanted  me 
to  intercede  in  his  behalf.  I made  some  inquiry  in  relation  to  his 
claim,  and  so  matters  run  along  until  alter  my  first  term  as  Gov- 
ernor had  expired.  When  it  expired,  I came  to  the  conclusion  that 
I would  not  appoint  a proxy  for  my  next  term,  but  that  I would 
endeavor  to  attend  the  meetings  of  the  board.  I did  attend  one 
meeting  of  the  board  in  New  York,  and  was  there  two  or  three 
days.  While  there  I made  all  the  inquiries  I thought  necessary  to 
make,  as  to  their  manner  of  doing  business  and  general  conduct  of 
affairs,  as  far  as  they  were  applicable  to  the  State’s  interests. 
After  that  I received  regularly  notices  of  other  meetings,  but  official 
duties  in  the  State  kept  me  here,  and,  as  a matter  of  fact,  I never 
attended  another  meeting  of  the  board.  In  the  early  part  of  last 
year  I determined  that  possibly  as  a matter  of  public  duty,  I ought 
to  appoint  some  person  who  was  an  expert,  to  make  an  examina- 
tion of  the  books  and  affairs  of  the  company,  so  that  I might  have 
something  in  my  office  (official)  to  satisfy  me  that  everything  was 
right,  as  between  the  company  and  the  State.  In  pursuance  of 
that,  I appointed  Mr.  Leonard,  with  authority  to  employ  a good 
bookkeeper  to  go  with  him,  and  make  an  examination  so  far  as 
they  related  to  the  interests  of  the  State.  He  did  so,  in  connection 
with  a Mr.  Nash.  I don’t  recollect  where  he  was  from. 

A member  of  the  committee — I think  he  was  connected  with  the 
Terre  Haute  and  Indianapolis  Railroad. 

Mr.  Cullom — I herewith  hand  you  a copy  of  the  authority  which 
I gave  Mr.  Leonard  to  present  to  the  president  of  the  company: 

State  of  Illinois.  Executive  Department, 
Springfield,  July  31, 1882, 

Hon.  W.  K.  Ackerman,  President  Illinois  Central  Railroad  Comiiany,  Chicago,  Illinois: 

Dear  Sir— Under  the  power  vested  in  me  by  the  law  of  the  State  of  Illinois  to  examine 
the  books  and  papers  of  the  Illinois  Central  Kailroad  Company,  for  the  purpose  of  verify- 
ing and  ascertaining  the  accuracy  of  the  accounts  of  the  gross  or  total  proceeds,  receipts 
or  income  derived  from  said  railroad,  I have  instructed  my  private  secretary.  E.  E, 
Leonard,  Esq.,  to  make  such  examination,  with  reference  to  the  business  of  the  two  years 
last  past,  and  authorized  him  to  employ  such  expert  and  clerical  assistance  as  may  be 
necessary.  He  will  call  upon  you.  and  I have  to  ask  that,  you  will  give  him  every  facility 
for  a thorough  and  speedy  performance  of  the  work  involved  in  making  this  examination. 

I am,  very  respectfully,  your  obedient  servant, 

S.  M.  CULLOM.  Governor. 

Mr.  Cullom — Mr.  Leonard  made  his  report  to  me,  which  you 
gentlemen  have  seen,  and  a copy  of  which  I herewith  present.  (The 
report  was  here  presented  and  marked  “No.  1.”) 

Springfield,  III.,  October  10, 1882. 

Hon.  S.  M.  Cultom,  Governor  of  Illinois: 

Sir:— In  pursuance  of  your  instructions  of  July  31st,  I have  made  an  examination  of 
the  books  and  accounts  of  the  Illinois  Central  Kailroad  Company  for  the  purpose  of 


21 


verifyintr  tho  statoments  submitted  by  said  company  of  the  gross  income  which  it  derives 
from  its  railroad  and  branches,  and  upon  which  the  payments  to  the  State  of  seven  per 
cent.,  annually,  of  the  gross  earnings  have  been  made. 

The  examination  comprised  first,  a general  investigation  of  the  plan  and  system  of 
accounts,  followed  by  checking  over  in  detail  the  accounts  for  one-half  year,  to  fully  test 
their  accuracy. 

As  a result  of  this  examination,  I have  to  report  that  the  accounts  which  have  been 
rendered,  are  correct,  and  that  the  interest  of  the  State  in  the  gross  income  has  been 
fully  and  accurately  stated,  with  no  dimunition  for  expenses  or  commissions. 

The  Illinois  Central  Railroad  Company  uses  and  operates  a number  of  railroads  of 
other  companies  in  this  State,  and  in  the  State  of  Iowa,  under  contracts  of  lease  and 
running  arrangements.  Since  July  1,  1882,  the  company  has  operated  underlease,  the 
railroad  from  Cairo  to  New  Orleans;  it  does  not  report  as  a part  of  its  taxable  income,  the 
profits  of  these  leases  and  contracts;  this  omission  is  proper,  as  the  leased  lines  in  Illi- 
nois are  built  under  distinct  charters,  and  the  lessee  company  pays  State  and  local  taxes 
on  their  assessed  valuation. 

The  earnings  from  business  done  jointly  by  the  Illinois  Central  Railroad  and  its 
leased  lines  are  divided  under  the  provisions  of  the  several  contracts  of  lease.  An  exami- 
nation of  these  contracts  shows  that  they  have  been  made  in  strict  accordance  with  the 
usage  governing  the  division  of  earnings  between  main  and  contributory  lines,  and  in  all 
cases  where  the  division  is  any  other  than  in  direct  proportion  to  mileage,  the  contracts 
provide  for  their  revision  by  experts,  at  frequent  and  stated  intervals. 

As  authorized  by  you,  I had  the  very  valuable  assistance  in  this  examination,  of  Mr 
Henry  T.  Nash,  an  experienced  and  capable  railroad  accountant. 

The  officers  of  the  Illinois  Central  Railroad  gave  every  facility  and  aid  for  making  the 
examination  thorough  and  complete. 

I am  under  special  obligations  to  the  auditor.  Mr.  J.  C.  Welling,  in  whose  department 
most  of  the  work  was  done,  and  where  the  pc^rfect  system  and  accuracy  of  detail  made  it 
possible  to  reach  definite  and  certain  results  with  comparative  ease. 

Very  respeetfuTy,  your  obedient  servant, 

E.  F.  LEONARD. 


Mr.  Cullom — That  is  about  all,  Mr.  Chairman,  that  I can  say  as 
to  the  run  of  my  connection  with  the  affairs  of  the  board.  Thinking 
possibly  you  gentlemen  might  want  to  know  how  the  dividends  run, 
I came  by  the  Auditor’s  office  and  asked  for  these  reports.  As  a 
matter  of  curiosity  I asked  him  to  give  me  one  or  two  that  dated 
back  of  my  administration.  So  he  gave  me  one  made  under  Gov- 
ernor Palmer  and  one  under  Governor  Oglesby.  (The  reports  from 
the  Auditor’s  office  were  here  shown  and  examined  by  the  com- 
mittee.) • • 

Mr.  Cullom — This  is  a specimen  of  the  affidavit  attached  to  the 
report  of  gross  earnings  and  amounts  due  the  State,  made  to  the 
Governor  every  six  months : 


AFFIDAVITS. 

STATE  OF  ILLINOIS,  } 

Cook  County,  Vss. 

City  of  Chicago.  ) 

John  C,  Welling,  being  duly  sworn,  states  upon  oath  that  he  is  the  Auditor  of  the  Illi- 
nois Central  Railroad  Company,  and  that  said  company  has  no  secretary  in  said  State; 
and  that  this  affiant  further  states  that  the  foregoing  statement  of  gross  earnings  derived 
from  said  road  for  the  six  months  ending  October  31, 1881,  is  a correct  abstract  and  state- 
ment from  the  books  and  accounts  of  said  company. 

J.  C.  WELLING. 

Subscribed  and  sworn  to  before  me. this  17th  day  of  December,  1881. 

John  Dunn,  Notary  Public. 

Mr.  Cullom — The  statements  were  sent  to  me  by  the  President  of 
the  road,  inclosed  in  a letter  such  as  the  one  I have  with  me, 
viz : — 

Illinois  Central  Railroad  Company, 
Chicago,  December  7,  1881. 

Hon.  Shelby  M.  Cullom,  Governor  of  the  State  of  Illinois  ; 

Dear  Sir— I beg  to  submit  herewith  a statement,  duly  verified,  of  the  gross  receipts  of 
the  Illinois  Central  Railroad  for  the  six  months  ending  31st  October,  1881,  showing  the 
amount  due  the  State  of  Illinois  for  tax  on  the  same  to  be  two  hundred  and  eight  thousand 
three  hundred  and  sixty-eight  and  28-100  dollars  ($208,368,28-100). 


22 


This  stiitoment  is  rendered  in  accordance  with  the  requirements  of  section  18  of  the 
charter  of  this  company,  approved  February  10,1851,  and  in  faithful  performance  of  the 
contract  between  the  State  of  Illinois  and  the  Company,  as  set  forth  in  said  charter. 

Yours  respectfully. 

W.  K.  ACKERMAN, 

I Acknowledged.!  President. 

Mr.  Varnell — As  an  ex-officio  director,  did  you  receive  a salary  as 
a director. 

Mr.  Cullom — No;  not  even  my  expenses. 

Mr.  Varnell — I understood  that  at  each  meeting  each  director  got 
a $i0  gold  piece? 

Mr.  Cullom — The  other  gentlemen  may  have  received  it,  I didn’t. 
I suppose  they  paid  their  directors,  though  I do  not  know;  it 
makes  no  difference  whether  they  did  or  not,  to  the  State.  The 
most  of  the  directors  are  old  stock-holders. 

Mr.  Kicks — Has  there  been  sufficient  examination  made  on  your 
part  to  determine  if  there  is  no  error  in  the  returns  made  by  the 
road  according  to  its  contract? 

Mr.  Cullom — The  most  that  I can  say  is  that  Mr.  Leonard  is  as 
competent  a man  as  can  be  secured,  and  the  man  he  employed  to 
assist  him  was  an  expert  in  dealing  with  railroad  accounts  and 
fully  competent  to  make  a general  examination  into  the  affairs  of 
the  company,  and  you  have  seen  the  report. 

Mr.  Ricks — What  length  of  time  were  they  engaged  in  this  inves- 
tigation ? 

Mr.  Cullom — They  were  up  there  several  weeks. 

Mr.  Kicks — Up  where? 

Mr.  Cullom — In  Chicago.  That  is  where  all  the  books  of  the 
company  are,  and  all  their  business  accounts.  I think  I paid  Mr. 
Leonard  for  Mr.  Nash,  and  for  expenses,  $150;  that  is  my  recollec- 
tion now.  Mr.  Leonard  made  no  charge  for  his  services. 


The  committee  met  pursuant  to  adjournment,  March  27,  18S3,  at 
11  A.  M.,  at  the  offices  of-  the  Illinois  Central  Railroad  Company. 
Present,  same  as  before. 

Joseph  F.  Tucker,  being  first  duly  sworn,  was  examined  by  the 
chairman,  and  testified  as  follows : 

Ques.  What  is  your  name? 

Ans.  Joseph  F.  Tucker. 

Q.  What  is  your  position? 

A.  Traffic  manager. 

Q.  Of  the  Illinois  Central? 

A.  Of  the  Illinois  Central  Railroad. 

Q.  How  long  have  you  acted  in  that  capacity? 

A.  I have  been  traffic  manager  since  1877,  six  years. 

Q.  What  has  been  the  rate  per  car  on  grain,  live  stock  and 
lumber  from  Springfield  to  Chicago? 


23 


A.  The  average  rate  on  grain  from  Springfield  has  been  about 
twenty  dollars  a car ; on  live  stock,  about  twenty-five ; on  lumber 
about  twenty-two  dollars. 

Mr.  Pearson — Are  those  the  present  rates? 

Ans.  Yes  sir.  I should  qualify  that  by  saying  there  has  been 
very  little  lumber  moved  to  Springfield,  and  there  is  no  grain 
moved  out,  and  there  has  been  no  ' stock  to  amount  to  anything ; 
you  see  the  Eastern  lines  control  that  matter. 

Q.  You  are  shipping  a good  deal  of  lumber  to  Springfield? 

A.  But  very  little.  The  commissioners’  rate  is  il  and  7-lOths, 
and  that  would  be  $23.40  a car. 

Q.  Above  what  weight  do  you  charge  excess  on? 

A.  We  have  no  penalties  attached,  unless  where  a person  insists 
in  breaking  down  our  cars,  by  overloading.  For  instance,  we  ask 
them  to  load  30,000,  as  far  as  grain  is  concerned;  if  they  load  40,- 
000  we  generally  look  at  it  as  being  a mistake,  and  have  made  no 
difference,  and  if  any  excess  was  charged,  we  generally  paid  it 
back. 

Q.  You  say  the  rate  from  Springfield  to  Chicago  is  $25? 

A.  Our  rate  on  live  stock  from  Springfield  proper,  is  $29.25. 

Q.  What  proportion  of  that  does  the  Illinois  Central  proper 
get  ? 

A.  As  I, understand  it,  the  line  from  Gilman  to  Chicago,  $8.  I 
would  like  to  explain  that.  The  Springfield  division  was  originally 
Ihe  Gilman,  Clinton  and  Springfield  road.  It  was  largely  a Penn- 
sylvania Central  institution ; it  sent  all  of  its  business  that  way,  via 
Ihe  T.,  P.  and  W.  railroad.  It  gave  us  nothing  but  what  it  could 
not  help  giving  us ; if  the  markets  were  on  a “boom,”  we  might  get 
a little  of  it.  The  road  finally  was  for  sale.  Now,  if  that  had  gone 
into  the  hands  of  a rival  line — for  instance,  if  it  had  still  remained 
in  the  Pennsylvania  Central’s  hands — it  would  have  very  seriously 
•competed  with  our  main-line  business  in  the  neighborhood  of  Clinton, 
and  very  seriously  competed  with  our  branch  business  in  the  neigh- 
borhood of  Gilman,  and  would  have  reduced  our  revenue  on  what 
you  might  term  the  Illinois  Central  business,  proper ; it  being  the 
general  effect  of  rival  lines,  to  divide  the  business.  Now,  in  the 
purchase  of  the  Springfield  division,  we  maintain  rates  on  the  Il- 
linois Central  main  line  and  on  the  branch, — and  the  amount  of 
such  traffic  is  considerable,  and,  of  course,  we  increase  the  revenue 
to  the  State. 

The  Chairman — From  the  increased  • amount  to  the  Illinois  Cen- 
tral ? 

A.  Yes,  sir ; and  had  we  not  obtained  the  Springfield  division, 
the  Illinois  Central  would  not  have  received  any  portion  of  this 
eight  dollars,  and,  consequently,  the  State  would  not  have  got  its 
fifty-six  cents. 

Mr.  Pearson — Do  you  not  think  you  could  get  the  traffic  from  and 
to  the  Gilman  and  Springfield  road,  if  you  charged  a higher  rate 
from  Gilman  here. 

A.  No,  sir ; we  could  not.  The  Gilman  and  Springfield  road,  be- 
fore we  took  it,  was  a failure.  Standing  by  itself,  it  could  not  pay 
its  expenses. 


24 


Q.  Does  not  the  Illinois  Central  control  that  road? 

A.  The  Springfield  road?  Yes,  sir. 

Q.  Are  not  four  of  its  five  directors  also  directors  of  the  Illinois 
Central,  proper? 

A.  I believe  so.  The  Illinois  Central  has  succeeded  in  removing 
a large  amount  of  unreasonable  competition  not  only  with  itself,, 
but  with  others,  and  made  reasonable  and  fair  rates ; and  in  the 
way  of  purchases  for  cash,  we  have  been  able  to  run  the  line  a 
good  deal  cheaper  than  anybody  else  could,  under  any  circum- 
stances. 

Q.  I understand,  now,  that  the  Illinois  Central  controls  it? 

A.  Yes,  sir. 

Q.  There  are  five  directors,  and  four  of  its  five  directors  are  also 
directors  of  the  Illinois  Central? 

A.  Yes,  sir.  I do  not  know  exactly  the  number,  but  I think  that 
is  about  right. 

Q.  Do  you  not  think  you  would  get  the  business  now,  as  you  con- 
trol it,  if  it  was  prorated? 

A.  That  would  not  be  fair  to  the  branches,  main  line,  or  Spring- 
field  division. 

The  Chairman — Now  I understand.  Mr.  Tucker,  please  explain  why 
it  is  fair  to  the  branches  and  to  the  main  line  to  charge  only  $8  per 
car  for  81  miles,  from  Gilman  to  Chicago? 

A.  Because  this  is  an  outside  business.  If  the  Illinois  Central 
had  not  control  of  that  line,  the  Illinois  Central  would  not  have  got 
it;  and  in  charging  $8,  in  my  judgment,  is  very  liberal  to  the  main 
line  of  the  Illinois  Central,  and  there  is  a profit  in  that  $8  to  the 
main  line. 

Q.  To  haul  it  at  that  rate? 

A.  To  haul  it  at  that  rate.  Take  it  to-day,  I very  much  doubt 

if  through  a series  of  years — ten  or  twelve  years — that  we  have 
operated  the  Springfield  division,  whether  the  eight  dollars  does 
not  approximate  a yrj  rata.  We  have  hauled  stock  from  Spring- 

field  as  low  as  twelve  dollars,  and  still  allow  the  Illinois  Cen- 

tral eight  dollars.  Now  the  same  rule  would  apply  on  the  middle 
division.  The  Wabash,  you  know,  had  a charter,  and  they  were 
to  build  from  Decatur  to  Chicago,  and  that  line  was  to  be 
nearly  the  line  which  our  middle  division  now  occupies,  and  by 
pushing  out  our  middle  division  it  threw  them  further  west,  and 
thereby  we  lessened  their  competition  on  the  Illinois  Central  and 
kept  up  the  revenue  on  it.  We  used  that  middle  division  as  a 
breakwater,  as  it  were,  for  protection.  I don’t  know  of  a better  test 
of  that  thing  than  our  own  action,  that  is,  if  an  outside  line  was 
to-day  to  offer  us  their  business  at  that  rate,  over  that  same  track,  the 
same  distance  for  that  money,  I should  take  it,  and,  in  fact,  did  take 
it ; for  instance,  the  Paducah  road  ran  northwest  to  Streator,  and 
crossed  our  Springfield  division  at  Gibson,  and  connected  with  the 
Alton  and  C.,  B.  and  Q.  K.  K.,  at  Streator,  and  were  a good  deal 
of  trouble  to  us.  I suppose  you  were  all  familiar  with  the  situation 
of  the  Paducah  line ; the  Wabash  now  own  it,  and  it  was  midway 
between  our  branch  and  our  main  line,  and  they  went  to  Streator, 
(indicating  on  the  map).  They  commenced  at  Streator  with  the 


25 


Alton  and  the  Burlington.  They  sold  their  business — that  is,  they 
asked  each  of  the  roads  for  a rate  which  they  would  haul  their 
business  for,  which  I think  is  a fair  comparison  to  this,  and  we  did 
haul  their  business  at  about  eight  dollars  a car,  right  over  this  same 
track,  and  for  a longer  distance,  that  is,  Gibson  to  Chicago,  and  in 
that  of  course  I had  no  other  object  for  it  than  because  I thought 
there  was  some  money  for  the  Illinois  Central,  otherwise  we  would 
not  have  touched  it. 

Mr.  Pearson — You  built  the  Gilman  road  originally,  did  you  not? 

A.  No,  sir,  we  did  not  build  it. 

Q.  You  owned  all  the  stock  of  the  company? 

A.  I believe  the  Illinois  Central  Eailroad  does,  but  we  didn’t 
build  it ; we  found  it  there,  it  was  for  sale,  and  it  was  troublesome 
— for  instance  I might  compare  it  to  your  own  house,  and  you  have 
got  a vacant  lot  next  to  you,  and  it  is  for  sale,  and  you  don’t  want 
a circus  or  beer  garden  there  next  to  you,  and  you  buy  it.  It  was 
going  into  somebody’s  hands,  and  as  a matter  of  self-protection  we 
bought  it. 

Q.  But  you  own  the  road  now,  and  control  it.  The  question 
comes  up  why  you  should  not  prorate  the  freight  per  mile  ? 

A.  Prorating  would  not  be  fair  to  the  Springfield  division,  or  fair 
to  the  main  line ; I don’t  think  it  would  enable  the,  Springfield  divi- 
sion to  pay  the  interest  on  its  bonds ; it  is  a hard  road  to  operate  ; 
there  are  a good  many  grades,  trestles  and  bridges ; and  on  the 
other  hand  I think  prorating  would  be  unreasonable  to  the  main 
line,  because  the  main  line,  by  ownership  of  the  Springfield  division, 
is  defended  very  largely  in  its  own  revenues,  and  the  eight  dollars 
it  receives,  in  my  judgment,  is  more  than  it  costs  to  haul. 

Q.  You  say  it  costs  $29.25  to  ship  a car  load  of  stock  from 
Springfield  to  Chicago? 

A.  Yes ; for  tw^o  or  three  years  the  rate  on  live  stock  was  not  higher 
than  $20  to  Springfield.  Twenty  dollars  would-be  a high  average. 

Q.  But  the  tariff  is  $29.25  ? 

A.  The  tariff  is  $29.25. 

Mr.  Caldwell — Now,  do  you  rebate  on  that,  or  not? 

A.  No,  ;We  do  not  rebate  that.  These  rebate  matters  do  not 
seem  to  be  understood ; I can  explain  them  to  you ; they  are  more 
of  a bugbear  than  need  be.  There  has  been  no  rebate  to  Spring- 
field  for  some  time ; the  rates  have  been  maintained,  there  right 
along  for  two  or  three  years ; the  rates  this  side  on  stock  have 

varied  a good  deal,  and  it  goes  as  low  as  $25. 

Mr.  Pearson — As  low  as  $25  ? 

A.  Yes,  sir. 

Q.  Then  the  Illinois  Central  gets,  out  of  the  $29.25  to  Spring- 
field,  eight  dollars? 

A.  Yes,  sir. 

Q.  And  you  give  the  branch  road  $21.25  of  that? 

A.  Yes,  sir;  there  is  but  little  stock,  or  in  fact  any  business 
from  Springfield.  The  business  is  very  small. 

Q.  That  is,  take  one  car  for  instance,  $21.25  goes  to  the  Gilman 
and  Springfield  road,  and  to  the  Illinois  Central  proper  eight  dol- 
lars ? 

A,  Yes,  sir. 


26 


Mr.  Pearson — Is  this  not  an  unjust  discrimination  between  your- 
self and  the  people  of  the  State? 

A.  No,  I consider  it  very  just;  that  it  is  not  fair  to  take  one 
car,  or  to  take  the  Springfield  business  by  itself,  but  it  is  fair  to 
take  the  entire  Springfield  division  business  for  a series  of  years. 
I calculate  it  is  our  duty  to  take  all  the  legitimate  business  that 
belongs  to  the  Springfield  division,  no  matter  what  competition 
comes ; we  must  defend  our  shippers  and  our  stations.  I don’t 
believe  in  letting  any  other  road  take  away  our  business,  and  believe 
that  to  be  fair  to  the  Illinois  Central,  because  believing  it  would 
work  good  to  the  company,  shippers  and  stations,  and  to  the  State. 
Now,  taking  the  Springfield  division,  and  taking  it  for  granted  that 
we  have  done  all  the  business  that  fairly  belongs  to  it,  and  the 
aggregate  say  for  the  year  is  so  much,  that  is  all  business  to  and 
from  the  Springfield  division — now,  your  question  is,  do  I think  it 
is  a fair  division,  that  rate  for  the  main  line  ? I think  it  is  a very 
liberal  rate  to  the  main  line  of  the  Illinois  Central. 

The  Chairman — Well,  is  that  because  you  have  sold  this  Spring- 
field  business  to  the  Wabash  or  any  other  road,  and  done  it  at  as 
reasonable  a rate  ? 

A.  We  could  have  done  so,  but  I would  not  give  that  as  my 
answer : I would  state  that  the  final  purchase  of  the  Springfield  di- 
vision defended  our  road  with  reference  to  the  main  line,  because 
it  was  a rival,  and  would  have  affected  more  or  less  our  business, 
as  every  competing  line  at  a junction  affects  every  road  more  or 
less,  and  thereby  disturbs  rates.  In  this  case,  therefore,  it  would 
have  lessened  the  amount  that  we  pay  the  State,  and  that  would 
be  sufficient,  it  seems  to  me,  in  itself  to  show  that  the  main  line 
was  drawing  a liberal  amount  in  the  eight  dollars,  and  that  the 
branch  should  receive  the  difference. 

Mr.  Caldwell — Does  the  Illinois  Central  proper  receive  eight  dol- 
lars from  all  classes  per  car  load  of  freight  from  Springfield,  irre- 
spective of  what  the  rate  is,  whether  at  $25  or  less  ? 

A.  Yes,  sir ; if  it  is  but  ten  dollars,  they  would  get  eight. 

The  Chairman — The  eight  dollars,  as  I understand,  is  arbitrary? 

A.  Yes,  sir. 

Q.  You  take  that  out  if  they  should  only  get  ten  dollars? 

A.  Yes,  sir.  Now,  you  take  merchandise  for  instance;  you  must 

not  base  merchandise  on  the  tonnage,  as  a car  of  merchandise  often 
has  but  two  tons  in  it,  but  the  merchandise  comes  into  our  freight 
house,  and  it  must  go  right  out,  and  I don’t  believe  our  merchan- 
dise averages  four  tons  to  the  car ; it  won’t  average  more  than  five 
tons  if  the  car  is  full,  because  it  comes  in  bulky  packages,  it  comes 
in  the  shape  of  pianos  and  stoves,  and  so  on,  and  you  have  got  to 
load  them  as  they  come,  and  there  is  about  everything  on  top  of 
earth  shipped  out  of  Chicago  every  twenty-four  hours,  as  you  would 
see  if  you  stayed  in  the  freight  house  for  a few  hours ; so  that  the 
eight  dollars  for  merchandise  would  be  extremely  liberal. 

Mr.  Caldwell — Do  you  pro  rate  by  the  distance  less  than  car  load 
lots  ? 

A.  No,  sir ; we  allow  eight  dollars  for  a car  load,  and  fifteen 
cents  per  hundred  pounds  for  less  than  car  loads. 


27 


The  Chairman — Where  it  is  less  than  a car,  you  then  prorate? 

A.  No,  sir,  there  is  no  prorating  about  it ; it  is  eight  dollars 
a car ; no  matter  what  the  car  weighs,  it  is  eight  dollars,  and  small 
lots  fifteen  cents. 

Q.  Well,  that  is  prorated? 

A.  You  can  readily  see  that  prorating  from  Chicago  to  all  the 
stations  on  the  Middle  and  Springfield  divisions  would  make  the 
Auditor’s  office  a great  many  figures,  so  when  we  first  got  at  that, 
we  struck  what  we  thought  would  be  a fair  average  for  the  business 
in  comparison  to  that  eight  dollars  a car,  and  we  landed  at  fifteen 
cents,  and  fifteen  cents  a hundred  would  be  much  more  than  the 
j)ro  rata  on  fourth  class,  perhaps  less  than  the  pro  rata  on  first  and 
second,  of  which  there  is  not  much  moving.  Of  course,  first-class 
includes  furniture  and  bulky  articles,  and"  fourth  class  includes 
heavy  articles,  such  as  soap,  sugar,  iron,  etc. 

Q.  You  say  it  is.  more  than  a prorate  for  the  heavy  articles? 

A.  Yes,  sir. 

Q.  In  less  than  car-load  lots? 

A.  Yes,  sir. 

Mr.  Pearson — Do  you  apply  the  same  rule  to  the  branch  to  Kan- 
kakee ? 

A.  Yes,  only  the  distance  is  different ; 56  miles  from  Kankakee, 
and  81  miles  from  Gilman.  Now,  here  is  a fair  case  which  will 
illustrate  that ; here  is  our.  line  at  Kankakee,  the  Cincinnati  line, 
which  runs  from  Kankakee  to  Cincinnati,  has  a good  deal  of  business, 
and  if  they  should  ask  us  what  we  would  haul  their  freight  for,  I 
should  say  that  the  rate  we  allowed  the  Illinois  Central  would  be 
proper,  and  I would  do  it,  and  think  it  would  be  fair  to  the  Illinois 
Central. 

The  Chairman — In  other  words,  you  would  be  willing  to  take  the 
freight  off  of  that  line  of  road,  belonging  to  another  corporation,  at 
the  same  rate  that  you  would  take  it  off  these  branches? 

A.  Yes,  sir,  and  I would  feel  very  sorry  to  lose  it,  because  if  you 
are  running  an  omnibus  say  between  here  and  the  Tremont  House, 
and  you  have  got  only  three  passengers  in  it,  and  you  have  a chance 
to  fill  it  up  at  a low  rate,  rather  than  there  should  be  a loss  in  it, 
you  do  it.  Now,  here  is  a road  in  existence,  and  every  pound  of 
freight  or  every  extra  passenger  you  can  get  by  legitimate  means  is 
profit,  as  a good  many  of  your  expenses  would  be  but  slightly  in- 
creased, that  is  an  increase  in  the  business  would  not  change 
expenses,  and  if  you  can  get  the  increased  business,  it  is  best  to  do  it. 

Mr.  Varnell — Now,  I want  to  ask  a question  or  two.  Do  you 
know  how  many  east  and  west  roads  crossed  the  Illinois  Central 
about  fifteen  years  ago? 

A.  Well,  I should  say  three  or  four.  Some  one  stated  that  the 
St.  Louis  and  Terre  Haute  crossed  at  Pana  and  Mattoon  about 
twenty  years  ago,  and  fifteen  years  ago  I should  say  there  was 
three  or  four. 

Q.  Now,  how  many  roads  cross  the  Illinois  Central  (referring  to 
the  map)  ? 

A.  About  24  roads. 


28 


Q.  There  are  now  24  roads  crossing  the  Illinois  Central? 

A.  Yes,  sir;  crossing  and  connecting  with  us. 

Q.  Well,  they  in  a great  measure  take  from  you  now  a good  deal 
of  the  freight  that  you  used  to  get  fifteen  or  twenty  years  ago  ? 

A.  Yes.  I might  cite  as  an  illustration:  For  instance,  you  are 

familiar  with  the  whole  question  m Jefferson  county.  You  may 
take  the  Ohio  and  Mississippi  road,  and  there  it  crosses  at  Sando- 
val, and  it  is  a nice  wheat  country;  and  the  distance  to  St.  Louis 
is  about  seventy  miles ; and  St.  Louis  is  as  good  a wheat  market  as 
Chicagp,  if  not  better;  and  our  distance  from  Sandoval  to  Cairo  is 
120  miles  altogether;  and  how  are  we  going  to  get  in  there  unless 
we  fight  for  it  ? And  how  can  we  fight  for  it  if  they  tie  our  hands  ? 
And  the  result  is,  that  we  have  defended  our  stations,  and  consid- 
ered it  our  duty  to  defend  our  different  stations  in  every  way.  When 
a new  road  comes  in,  I consider  it  our  duty  to  defend  our  stations ; 
for  if  we  lay  down,  the  State  is  hurt,  and  everybody  is  hurt;  and 
•I  am  sorry  to  say  that  railroad  men  are  not  any  better  than  any- 
body else. 

Q.  Well,  does  the  fact  of  the  existence  of  these  numerous  other 
roads  that  tap  and  cross  the  Illinois  Central  reduce  the  amount  of 
freight  that  you  would  otherwise  have  gotten? 

A.  Yes,  sir;  and  they  were  built  for  that  purpose,  and  built  for 
sale,  and  were  sold. 

Q.  I was  going  to  ask  in  that  question,  do  they  tend  to  keep 
down  the  gross  earnings  of  the  Illinois  Central? 

A.  Yes,  sir. 

Q.  And  now  you  are  hauling  more  freight  in  1882.  You  haul, 
perhaps  two  tons  where  fifteen  years  ago  you  did  not  haul  more 
than  one  ton ; and  you  are  not  getting  any  more  than  you  got  for 
the  one  ton  fifteen  years  ago? 

A.  No,  sir.  We  are  getting  less  on  account  of  the  competition. 

Mr.  Varnell — Well,  wouldn’t  the  rate  of  the  railroad  commission 
make  a difference? 

A.  Yes,  sir,  that  would  make  a difference. 

Q.  How  many  pool  contracts — or,  about  how  many  pool  contracts 
have  you  to-day  with  other  railroads? 

A.  We  have  got  pooling  contracts  with  almost  every  crossing, 
to  pool  up  the  profits,  I don’t  think  the  pooling  mattm^  is  fully 
understood.  The  pools  would  not  have  been  made  except  for  the 
purpose  of  maintaining  just  and  reasonable  rates  to  all  shippers. 

Q.  Now,  does  the  fact  of  extending  these  pooling  contracts  inter- 
fere with  the  gross  earnings  of  the  Illinois  Central  railroad? 

A.  It  adds  to  them  very  largely. 

Q.  Instead  of  detracting  from  it? 

A.  Yes,  sir.  If  it  was  merely  that  the  east  and  west  lines — now, 
the  Ohio  and  Mississippi ; they  have  half  the  distance  we  have,  and 
in  making  a low  rate  they  would  earn  more  money,  and  they  would 
lose  less,  and  they  get  us  in  the  end — that  is,  the  short  haul  whips 
the  long  one. 


20 


Mr.  Pearson — This  car-haul  rate  from  Kankakee  and  Gilman  is 
made  regardless  of  schedule  as  fixed  by  the  railroad  commissioners  ? 

A.  It  is  rhade  regardless,  and  it  is  an  arbitrary  allowance  to  the 
main  line.  If  we  fight  against  the  middle  division  and  against  com- 
petition to  support  our  people,  we  still  would  allow  the  main  line 
that  much.  In  my  judgment,  this  was  very  liberal  to  the  main 
line ; and  if  there  has  been  one  thing — if  you  will  allow  me  to  say 
it,  and  perhaps  I should  not  say  so — but  if  there  has  been  one  thing 
that  this  company  has  guarded,  it  is  the  interests  of  the  State  in 
that  seven  per  cent.  I have  heard  it  in  Douglas’  time,  and  from 
everybody  else. 

The  Chairman— Have  you  any  further  statement  you  desire  to 
give  ? 

A.  No,  I have  nothing,  except  to  say  that  if  I can  do  anything 
about  these  matters  of.  railroading,  which  are  somewhat  complicated, 
or  can  be  of  any  service  in  clearing  up  the  halo,  I shall  be  happy 
to  do  so,  and  it  will  afford  me  great  pleasure,  and  I am  very  mucn 
obliged  for  the  kindness  with  which  you  have  let  me  off. 

Mr.  Caldwell — Is  there  any  fixed  rule  in  regard  to  the  proportion 
of  the  freight  earnings'  between  the  main  line  and  the  leased  line? 

A.  They  vary  with  the  peculiar  circumstances  attached  to  each 
line.  It  depends  largely  on  the  volume  of  the  business,  and  the 
country  through  which  the  new  business  is  to  come.  As  low  a car- 
haul  rate  would  certainly  not  be  made  to  a line  that  competed  for 
business,  and  simply  gave  the  main  line  such  business  as  it  could 
not  otherwise  dispose  of,  as  would  be  given  to  a line  that  gives  its 
entire  business.  The  peculiar  circumstances  of  each  line  or  con- 
necting line  are  different,  entirely  so ; and  each  one  has  to  be  taken 
up  on  its  merits. 

Q.  How  does  the  rate  per  ton  per  mile  allowed  the  Illinois  Cen- 
tral on  business  to  and  from  Springfield,  and  middle  divisions,  com- 
pare with  what  the  Illinois  Central  receives  from  its  competing  busi- 
ness ? 

A.  About  the  same,  or,  if  anything,  the  rates  from  the  middle 
and  Springfield  divisions  are  higher. 

At  this  point  the  committee  adjourned,  to  meet  at  the  Grand 
Pacific  at  4 o’clock  this  P.  M. 


Four  O’clock  P.  M. 

The  committee  met  pursuant  to  adjournment,  at  four  o’clock  P.  M. 

E.  P.  Kipley,  called  by  the  committee,  and  being  first  duly  sworn, 
testified  as  follows : 

Mr.  Crews — What  is  your  name  and  occupation? 

A.  General  freight  agent  of  the  C,,  B.  & Q.  E.  E. 

Q.  How  long  have  you  been  engaged  in  that  business  ? 

A.  About  fifteen  years ; and  in  my  present  position  not  quite  five 
years. 


30 


the  feeder  on  a percentage,  whatever  may  be  the  rate.  In  the  case 
of  an  arbitrai-y  car  haul,  of  course  the  main  line  gets  so  much, 
whatever  the  difference  in  rate  may  be.  Whatever  the  increase  is, 
the  feeder  gets  it ; and  whatever  the  decrease  is,  the  feeder  stands, 
if  you  have  an  arbitrary  car  haul.  If,  on  the  contrary,  you  base  it 
on  a percentage,  they  both  share  and  share  alike  in  the  increase 
and  decrease.  Our  policy  has  been  to  make  a percentage  arrange- 
ment rather  than  a car  haul. 

Q.  I will  put  a hypothetical  case : In  the  case  of  the  Spring- 

field  division  of  the  Illinois  Central,  which  is  one  hundred  and 
twelve  miles,  running  from  Springfield  to  Gilman,  and  it  is  eighty- 
one  miles  from  Gilman  to  Chicago,  on  a car  of  freight  there  wa& 
say,  twenty-five  to  twenty-nine  dollars,  fluctuating  between  such 
amounts.  I will  ask  you  if  an  arbitrary  rate  of  a car  haul  of 
eight  dollars  fixed  by  the  main  line  would  be,  in  your  judgment, 
enough,  or  the  proper  proportion  to  give  to  the  main  line,  or  what 
proportion  it  ought  to  have? 

A.  There  is  one  hundred  and  twelve  miles  of  the  branch,  and 
eighty-one  miles  of  the  main  line. 

Q.  Yes.  Now  then  fix  an  arbitrary  rate  of  car  haul  on  that  line 
of  $8  to  Chicago,  whether  the  rate  is  big  or  little. 

A.  The  average  rate  being  then  say,  $29.25. 

Q.  Yes,  provided  it  comes  from  Springfield?  From  anywhere 
else  on  the  line  it  might  be  less,  of  course ; but  from  Springfield 
we  will  say  $29.25? 

A.  Then  they  allow  for  the  main  line  about  twenty- three  per 
cent  of  the  rate. 

Q.  Yes,  sir. 

A.  I should  not  think  it  was  any  more  than  fair  to  the  branch. 
The  question  comes  in  there,  whether  there  is  not— supposing  that 
road  is  independent,  supposing  the  branch  was  an  independent  cor- 
poration, and  it  is  crossed  more  or  less  at  different  places,  I am 
not  sufficiently  familiar  with  the  geography  of  the  place  to  say 
what  crosses  it.  A fair  arrangement  for  the  Illinois  Central  to 
make  with  the  division  would  be  to  take  this  business  at  the  junc- 
tion at  Gilman,  for  instance,  at  the  same  rate  at  which  any  of  the 
other  lines  would  handle  it,  and  take  it.  And  it  seems  to  me  that 
a thirty-three  per  cent  rate,  which  is  about  what  we  could  figure^ 
would  certainly  be  at  least  a fair  allowance  to  the  main  line. 

Q.  You  think  according  to  the  rule  of  trunk  lines,  of  main  lines 
and  other  freight  lines,  with  their  manner  of  doing  business  and 
getting  business  off  of  auxiliary  or  independent  lines,  that  that  per 
cent  would  be  a fair  rate? 

A.  Yes. 

Q.  That  is  among  railroad  men? 

A.  I should  say  so. 

Q.  And  railroad  companies? 

A.  Yes  sir.  It  is  very  often  the  case  where  the  railroads — where 
a trunk  line  buys  a feeder  outright,  and  consolidates  with  it,  stock 
and  everything  else,  it  is  very  often  the  case  that  the  earnings,  as 
a matter  of  convenience  of  book-keeping,  are  pro-rated  mile  for 
mile,  but  t at  is  more  of  a matter  of  convenience  and  because  it 


31 


Q.  As  general  freight  agent? 

A.  Yes. 

Q.  Does  your  road  have  any  leased  lines  ? 

A.  Yes,  sir. 

Q.  Other  than  the  main  line? 

A.  Yes,  sir,  it  has  a large  number  of  leased  lines ; of  lines  which 
we  call  auxiliary  lines ; that  is,  lines  of  which  we  own  the  stock  or 
majority  of  stock. 

Q.  Now  then,  what  is  your  rule  where  there  are  feeders — I mean 
where  they  furnish  the  freight  that  originates  on  their  lines,  what 
is  your  rule  of  prorating  the  earnings  where  they  come  on  to  the 
main  line  ? 

A.  Our  lule  is,  in  case  where  the  stock  and  bonds  have  not  been 
consolidated,  and  no  actual  consolidation  has  taken  place  with  the 
main  line,  to  treat  the  feeder  or  auxiliary  line  precisely  or  almost 
precisely  as  we  should  treat  any  other  road.  That  is  to  say,  we 
make  an  arrangement  with  them  for  a division  of  earnings  based 
upon  the  theory  that  they  have  control  of  their  own  business ; that 
we  are  going  into  competition  with  other  lines  for  the  control  of  it. 

Q.  Then  in  car  hauls,  what  would  be  the -proper  rate  for  car 
hauls  a distance  of  eighty-one  miles  over  your  main  line,  where  it 
had  come  off  of  one  of  these  auxiliary  lines.  That  is,  in  the  neigh- 
borhood of  that.  Of  course  it  fluctuates ; it  is  owing  to  the  terms 
you  can  make,  as  I understand? 

A.  That  would  depend  upon  a variety  of  circumstances. 

Q.  I want  you  to  give  that  variety  of  circumstances ; and  what 
it  would  be  under  some,  and  what  it  would  be  under  others? 

A.  A rate  which  would  be  a very  low  one  for  a small  traffic 
might  be  a high  one*  for  a large  traffic.  It  would  depend  very  largely 
upon  the  volume  of  business  which  the  feeder  turned  in  to  us  at 
that  point. 

Q.  Well,  if  the  feeder  turned  in  all  the  business  that  it  had  at 
that  point,  then  what  would  you  say  would  be  a fair  rate? 

A.  I suppose  that  they  would  turn  in  all  they  had,  but  that  may 
be  more  or  less,  and  the  arrangement  may  be  made  with  that  idea 
in  view.  The  more  there  was  of  it  the  less  the  rate  would  be.  It 
is  a very  hard  matter  to  say,  arbitrarily,  what  would  be  a fair  rate 
under  those  circumstances ; it  would  depend  upon  so  many  circum- 
stances. The  question  as  to  what  a fair  rate  is,  is  very  much  like 
a question  as  to  what  a fair  price  of  an  acre  of  land  is.  It  depends 
altogether  upon  its  location  and  upon  its  surroundings.  No  man 
can  answer,  arbitrarily,  the  question,  what  is  a fair  rate  or  what  is 
a reasonable  rate.  It  is  precisely  like  asking  the  question,  what  is 
a reasonable  price  for  a barrel  of  apples. 

Q.  Then  I want  to  get  at  what  your  folks  think  is  a fair  rate. 
Can  you  give  us  the  amount  of  freight  rate,  every  car  and  car 
haul  that  you  credit  up  to  your  main  line  off  of  some  of  your 
auxiliary  lines,  say  on  grain,  lumber  or  live  stock? 

A.  We  have  very  few  arrangements  based  on  a car  haul.  Our 
policy  is  to  make  those  based  on  percentages.  That  is  to  say,  the  main 
line  and  the  feeder  share  alike  in  any  reduction  that  may  become 
necessary,  and  we  base  our  division  as  ^"'^tw^^^n  the  main  line  and 


32 


don’t  make  any  difference  to  the  owners.  As  a matter  of  fact 
that  method  of  book-keeping  is  not  fair  to  the  branch ; it  does  not 
give  the  branch  a fair  show,  because  if  it  was  an  independent  road, 
any  road  would  stand  ready  to  do  that  amount  of  business  which 
they  simply  had  to  hook  on  to  and  haul  at  a very  low  rate,  the 
feeder  having  collected  it  all. 

Mr.  Caldwell — I want  to  ask  if  it  would  be  a material  point  in 
your  opinion,  in  this  particular  connection,  to  know  that  the  con- 
trolling interest  of  the  stock  of  this  Springfield  and  Chicago  road, 
or  Springfield  branch  of  the  Illinois  Central,  is  owned  entirely  by 
the  Illinois  Central  Kailroad  as  a company? 

A.  No,  sir,  that  has  no  material  bearing  upon  the  case.  If  they 
did  not  own  it  somebody  else  would.  The  question  would  remain, 
what  is  to  be  done  with  that  business.  Their  ownership  of  the 
stock  should  be  treated  as  simply  giving  them  preference  of  the 
i)usines8,  and  it  would  be  a better  way  to  keep  the  books  to  allow 
that  line  just  what  it  would  earn  as  if  somebody  else  owned  it. 
That  is  the  theory  on  which  we  take  all  our  leased  lines — what  we 
call  our  auxiliary  lines ; we  have  some  two  thousand  miles  of  them. 
As  an  illustration,  the  Burlington  and  Missouri  railroad  in  Nebraska 
is  controlled  by  us.  We  keep  separate  accounts  and  separate  books. 
They  haul  their  business  an  average  of  one  hundred  and  twenty- 
five  miles,  and  we  haul  it — all  the  business  they  contribute  to  us — 
four  hundred  and  eight-six  miles;  and  we  divide  with  them  on  a 
basis  of  50  and  50  per  cent,  on  the  theory  that  if  they  were  an  in- 
dependent line,  and  made  an  exclusive  contract  with  our  lines  as  a 
working  arrangement,  that  they  could  get  that  division  from  any 
other  line. 

Mr.  Pearson — You  own  a majority  of  the  stock:? 

A.  Yes,  we  own  the  stock  outright.  The  Chicago,  Burlington 
and  Kansas  City  is  another  illustration.  It  strikes  us  at  Burling- 
ton. The  entire  length  of  their  road  is  one  hundred  and  eighty- 
nine  miles.  Their  average  haul  does  not,  probably,  exceed  fifty 
miles.  We  give  them  sixty  per  cent  of  the  earnings,  and  take  forty. 

Q.  This  rate  from  Springfield  here  is  $29.25? 

A.  Yes. 

Q.  Bo  you  think  giving  $8  is  a fair  division  to  the  Illinois  Cen- 
tral, giving  $21.25  to  the  other  division? 

A.  I don’t  think  it  is  fair  to  take  any  one  item  to  ask  a question 
as  to  whether  that  is  reasonable. 

Q.  That  has  been  testified  to  here ; it  is  the  rate. 

A.  If  that  was  the  only  item,  and  there  was  nothing  but  stock 
on  the  line,  it  possibly  would  not  pay  any  road  to  make  a contract 
for  what  little  stock  there  was  there  on  the  basis  of  $8  from  Gil- 
man to  Chicago.  Taking  the  entire  volume  of  business  they  would 
deliver  to  any  one  line,  and  hauled  by  them,  I do  not  think  it  is 
an  unreasonable  basis.  The  real  question  is,  whether  the  Wabash 
or  any  other  line  crossing  that  road  would  not  be  willing  to-day  to 
make  a contract  on  the  same  basis  for  all  that  business. 

Q.  They  would  not  be  apt  to  make  a contract  of  that  kind  if  the 
Illinois  Central  controlled  the  road. 


A.  Should  the  fact  that  the  Illinois  Central  controlled  the  road 
he  taken  into  account?  Should  not  the  branch  be  treated  as  an 
independent  line?  The  fact  that  they  controlled  the  road  induced 
them  to  make  this  contract.  It  enables  them  to  have  a preference 
in  the  matter  of  drawing  business  to  them,  instead  of  somebody 
else.  If  I owned  a line  from  a point  eighty- one  miles  from  Chi- 
cago, and  a road  one  hundred  and  twenty  miles  long  offered  me 
their  business  at  $8  a car,  I would  take  it  very  quick.  It  is  so 
much  additional  business  to  that  road. 

Mr.  Caldwell — In  case  your  company  should  make  a rate  of  $29.25 
on  a car  load  of  live  stock  to  a competing  point,  distance  one  hun- 
dred and  ninety-three  miles, — eighty-one  miles  from  your  main  line 
and  one  hundred  and  twelve  from  your  leased  line, — what  propor- 
tion of  that  amount  should  go  to  each  in  order  to  a fair  division 
thereof  ? 

A.  I stated  a little  while  ago  it  is  very  hard  work  to  answer  the 
question. 

Q.  I don’t  stickle  for  the  live  stock  rate.  It  is  just  simply  to  get 
at  the  amount  charged  from  here  to  Springfield. 

A.  I will  say  now,  as  I have  already  said,  that  we  have  no 
arrangement  of  that  kind  with  our  lines  in  Illinois.  They  have  been 
all  consolidated  with  the  main  line,  and  we  keep  our  accounts 
simply  pro-rating  everything  by  the  mile.  But  if  a car  load  of 
stock  on  which  the  rate  was  *$29.25  should  come  off  of  the  Burling- 
ton and  Southwestern  road  any  distance,  no  matter  what  distance, 
say  five  miles,  we  should  haul  it  from  Burlington  to  Chicago  at 
forty  per  cent  of  the  through  rate.  In  that  case  it  would  be  $12 — 
that  is,  for  two  hundred  and  seven  miles,  even  though  they  would 
not  haul  it  but  five*.  We  should  get  $12,  and  they  would  get  $18. 

Mr.  Yarnell — You  would  be  glad,  Mr.  Kipley,  to  do  the  work  on 
that  basis? 

A.  That  is  the  basis  we  do  it  on,  in  that  cas^.  Of  course,  our 
•figures  vary;  we  have  no  rates  as  low  as  that/ 

Mr.  Caldwell — You  notice  the  words  “competing  point,”  in  my 
question  ? 

A.  Yes ; but  it  would  be  immaterial  here,  whether  it  was  a com- 
peting point  or  any  other  point.  If  we  made  an  arrangement  w.ith 
one  of  our  auxiliary  lines  for  their  business,  it  would  cover  all  the 
local  business  as  well  as  the  other  business ; it  would  be  a conclu- 
sive arrangement.  We  should  share  with  them  whatever  reduction 
they  would  be  obliged  to  make  at  the  competing  points. 

Q.  Suppose  the  point  of  embarkation  in  my  question  would  be  a 
competing  point? 

A.  It  would  not  change  the[  aspect  of  the  case,  at  all. 

Q.  That  is,  the  established  rate  on  live  stock  from  there,  you 
say? 

A.  Yes.  But  in  making  a contract  of  that  kind — assuming  that 
I own  the  Illinois  Central  and  somebody  else  owns  the  Springfield 
branch— the  question  of  competing  business  would  not  be  taken  up ; 
it  would  simply  be  a question  of  what  the  business,  as  a whole, 
amounted  to.  They  would  have  to  meet  the  competition.  As  I under- 
stand it  in  the  present  case,  if  competition  should  force  the  Spring- 


34 


field  division  of  the  Illinois  Central  to  make  a $20  rate  from  Spring- 
field  to  Chicago,  it  would  not  affect  the  earnings  of  the  Illinois  Cen- 
tral,— that  is,  the  rate  would  be  still  $8  from  Gilman,  and  the  entire 
reduction  would  come  off  the  Springfield  branch.  That  is  the  differ- 
ence between  a percentage  arrangement  and  a ‘‘car-haul”  arrange- 
ment. In  our  case,  if  the  rate  was  reduced  to  $20,  we  would  have  to 
stand  40  per  cent,  and  the  lines  meeting  us  at  Burlington  would  have 
to  stand  60  per  cent,  of  the  reduction. 

Mr.  Tucker — As  I understand  you,  the  Burlington  and  Southwest- 
ern are  in  the  same  situation  as  the  Springfield  and  Middle  di- 
visions— the  stock  owned  by  your  company? 

A.  Yes,  sir. 

Q.  And  the  through-rate  from  a point  ten  miles  west  of  Burling- 
ton being  fixed  by  that  company  for  the  lines  running  west  of  the 
river,  you  allow  them  60  per  cent.  ? 

A.  Yes. 

Q.  Sixty  per  cent,  for  hauling  ten  miles,  and  the  main  line  40 
per  cent,  for  210? 

A.  Two  hundred  and  seven. 

Q.  That  'is  the  difference  between  the  percentage  and  the  “car- 
haul”  ? 

A.  Yes,  sir. 

Mr.  Pearson — Is  that  the  only  leased  line  you  have? 

A.  No,  sir. 

Q.  Is  that  the  rule  in  regard  to  leased  lines? 

A.  It  depends.  The  theory  is,  as  I explained  a little  while  ago„ 
to  give  these  feeders  and  auxiliary  lines  we  own  and  control,  the 
same  terms  they  would  be  likely  to  get  if  they  were  independent. 

Mr.  Caldwell — How  far  may  this  road  in  question  be  forced  to  haul 
a car-load  of  grain  for  that  60  per  cent.  ? 

A.  One  hundred  and  eighty-nine  miles  would  be  the  limit ; but 
their  average  haul,  taking  all  their  business,  I am  quite  sure  does 
not  exceed  75  miles. 

Q.  For  which  they  get  60,  and  you  have  for  207  miles  40  per- 
cent ? 

A.  Yes.  In  the  case  of  our  Burlington  and  Nebraska  road,  in 
Nebraska,  we  divide  it — 50  and  50  per  cent.,  although  their  average 
haul  does  not  exceed  125  miles,  and  ours  486  miles.  In  the  case- 
of  the  Kansas  City  road,  which  is  in  the  same  condition  (we  own  it),, 
we  give  them  60  per  cent,  and  we  take  40, ' and  their  average  haul 
is  not  over  75  miles. 

Q.  Does  your  company  execute  leases  with  lateral  lines  of  which 
they  own  a controlling  interest  of  the  stock,  and  guarantee  the  bonds, 
both  as  regards  principal  and  interest? 

A.  I think  not.  I am  not  sufficiently  familiar  with  the  early  his- 
tory of  some  of  our  branches  in  Illinois,  to  answer  the  question  in- 
telligently, but  I think  that  the  consolidation  has  taken  place  with 
nearly  all  of  them,  if  not  all  of  them — actual  consolidation. 

Q.  And,  would  that  in  your  case,  in  the  case  of  your  company, 
amount  to  consolidation;  the  owing  of  the  majority  of  the  stock,, 


35 


and  backing  the  payment  of  the  bonds,  and  the  prompt  payment  of 
interest  as  it  matures  ? 

A.  No,  sir,  it  would  not  amount  to  consolidation.  It  would  re- 
quire an  act  of  consolidation  to  do  that. 

Q.  Does  the  act  of  consolidation  generally  follow  such  circum- 
stances as  I have  stated? 

A.  It  may  and  it  may  not ; it  is  optional  with  the  party  that 
owns  the  stock.  They  may  consolidate  if  they  choose,  and  can 
maintain  a separate  organization  if  they  choose. 

Mr.  Varnell — The  question  I desire  to  ask  is  this : You  say  that 

the  average  haul  of  the  Burlington  and  Missouri  Eailroad  west  of 
the  Missouri  river  is  about  125  miles? 

A.  Yes. 

Q.  And  the  haul  this  side  of  the  river  of  the  freight  you  take 
from  that  road  is  about  480  miles? 

A.  Four  hundred  and  eighty-six  miles. 

Q.  Being  nearly  four  times  as  much  on  this  side  as  it  is  on  the 
west  side  ? 

A.  Yes. 

Q.  And  still  at  the  same  time,  you  divide  the  amount  that  you 
receive  for  that  freight,  50  per  cent,  each? 

A.  Yes,  sir. 

Mr.  Pearson — Did  you  say  407  or  207  ? 

A.  No;  on  the  Nebraska  road  486  against  an  average  haul  of 
120  miles.  The  Burlington  and  Missouri  in  Iowa  has  been  consoli- 
dated with  the  C.,  B.  and  Q. 

Mr.  Varnell — It — the  Burlington  and  [Missouri  in 'Nebraska — was 
finished  up  to  Denver  last  year? 

A.  Yes,  sir.  That  is,  our  division  on  business,  other* than  Colorado 
business.  We  have  a fixed  rate  with  them  on  Colorado  business. 

Q.  If  that  explanation  or  answer  you  gave  to  that  question  is 
correct  (which  I presume  it  is),  then  the  amount  that  the  Illinois 
Central  allows  to  the  main  line  for  the  freight  coming  off  the  Spring- 
field  division  is  larger  in  proportion  than  what  the  C.,  B.  and  Q. 
get  for  hauling  freight  from  the  B.  and  M.  K.  E.  ? 

A.  Yes  sir,  it  is  larger  in  proportion ; and  it  should  be  so,  be- 
cause of  the  smaller  haul.  It  is  a well  known  fact  that  we  can 
afford  to  haul  400  or  500  miles  at  a less  rate  per  mile  than  we  can 
afford  to  haul  100.  So  the  rates  should  be  a little  higher  in  pro- 
portion to  the  mileage.  It  should  not  be  based  on  the  same  rate 
per  mile,  in  other  words. 

Mr.  Caldwell — Do  your  company  own  a controlling  interest  in  the 
stock  of  any  leased  lines  with  which  they  have  a lease  executed? 

A.  I can’t  answer  that  question.  My  impression  is  that  they  have 
only  one  line  in  Illinois  which  is  leased  to  us,  but  I can’t  say 
whether  that  is  the  case  or  not.  That  is  the  Chicago  and  Eock 
Eiver  branch.  It  does  not  connect  directly  with  the  Chicago,  Bur- 
lington and  Quincy  Company  anywhere.  It  starts  from  the  Chicago 
and  Iowa  road  to  get  to  it ; but  I am  not  able  to  say  now  whether  that  1 
is  actually  consolidated ; whether  we  hold  under  a lease  or  whether 
it  is  actually  consolidated. 


36 


Q.  Do  you,  to  a certainty,  know  whether  or  not  you  own  a con- 
trolling amount  of  the  stock  in  there  ? 

A.  I don’t  know  whether  we  do,  to  a certainty.  I know  that  we 
own  a majority  of  the  bonds,  if  not  all  of  them.  I don’t  knowhow 
it  is  about  the  stock.  My  impression  is  we  own  a majority  of  that. 
The  financial  part  of  the  ^institution  is  something  I don’t  trouble 
myself  very  much  about. 

Mr.  Pearson — Your  duty  is  to  fix  rates? 

A.  Yes,  sir. 

Adjourned  until  10  o clock  A.  M.,  March  28,  1883. 


Committee  met  at  4 o’clock  P.  M.,  March  28th,  A.  D.  1883,  at 
room  24,  Grand  Pacific  Hotel,  Chicago,  Illinois. 

Present — Chairman  Crews,  Caldwell,  Varnell  and  Pearson. 

C.  H.  Chappell,  having  been  first  duly  sworn  testified  as  follows : 

The  Chairman — Give  your  name,  residence  and  occupation. 

A.  C.  H.  Chappell ; residence,  Chicago ; Acting  General  Manager 
of  the  Chicago  & Alton  railroad. 

Q.  How  long  have  you  been  acquainted  with  the  management  of 
that  or  other  railroads  of  Illinois? 

A.  About  twenty-five  years. 

Q,  I would  like  to  have  you  give  to  the  committee  your  rate  or 
basis  of  prorating  freight  between  the  main  line  of  your  road  and 
auxiliary  or  lateral  lines,  where  the  freight  originates  on  the  auxil- 
iary line? 

A.  We  have  no  division  of  that  kind ; in  other  words,  we  keep 
no  separate  account. 

Q.  Your  company  hauls  freight  that  is  furnished  by  other  lines, 
does  it  not? 

A.  Other  lines?  What  do  you  mean  by  other  lines? 

Q.  I mean  lines  of  road  that  cross  your  road,  or  terminate  on 
your  line? 

A.  Yes,  sir,  we  have  some  business  of  that  kind,  for  other  rail- 
road companies,  you  mean? 

Q.  Yes,  for  other  companies? 

A.  Yes,  sir, 

Q.  In  the  business  of  that  character,  what  is  usual  among  rail- 
road men — what  proportion  of  the  freight,  I mean,  does  your  road 
get  ? 

A.  That  depends  entirely  on  circumstances. 

Q.  I wish  you  would  explain  the  different  circumstances,  and  in 
what  manner  you  make  the  rate,  what  produces  the  different  rates  ? 

A.  Various  causes,  such  as  competition,  long  and  short  haul, 
volume  of  business  and  the  character  of  the  business ; in  other  words, 
when  business  of  that  character  is  offered  us,  we  make  the  best 
bargain  we  can. 

Q.  Can  you  give  us  an  illustration  in  your  own  experience  how 
it  may  vary? 


B7 


A.  We  have  recently  offered  another  line  an  entrance  into  Chi- 
cago over  125  miles  of  our  road  on  the  basis  of  $9  a car  for  15  tons 
of  freight.  We  have  at  times,  too,  on  long  hauls,  for  instance  from 
Evansville  to  Chicago  via  Lincoln,  offered  to  prorate  on  that  kind 
of  business. 

Q.  J^'rom  where  to  where? 

A.  Evansville  to  Chicago.  Of  course  the  rate  would  be  a short 
line  rate,  and  we  would  take  our  proportion  according  to  miles ; that 
would  give  us  155  miles  from  here  to  Lincoln.  Of  course  we  could 
not  do  that  on  a short  haul ; and  the  rates  are  all  based  on  various 
circumstances  of  that  kind.  We  haul  from  Joliet  to  Chicago  the 
business  of  the  Chicago,  Pekin  and  Southwestern. 

Q.  At  what? 

A.  At  $5  a car. 

Q.  What  is  the  distance? 

A.  Forty  miles. 

Q.  If  you  haul  40  miles  for  $5  a car,  what  would  be  the  propor- 
tionate rates,  say,  for  81  miles? 

A.  Well,  I should  say  about  a car,  or  $9 ; that  would  depon'd 
on  the  volume  of  business  we  could  get. 

Mr.  Caldwell — In  case  your  company  should  make  a rate  of  |29.25 
on  a car-load  of  freight  to  a competing  point  distant  193  miles,  81 
miles  over  your  main  line  and  112  over  the  lateral  line,  what  pro- 
portion of  that  amount  do  you  think  should  go  to  each  in  order  to 
a fair  division? 

A.  It  is  the  custom  to  allow  the  branch  line  or  the  line  origin- 
ating the  business  an  arbitrary  rate.  In  trunk  lines,  the  main  line 
takes  considerably  less  than  a prorate.  That  is  a very  usual  method 
of  dividing  rates. 

Q.  Would  you  indicate  a division  just  at  a venture  under  any 
circumstances  that  you  thought  proper? 

A.  I could  hardly  do  that  without  a more  specific  case. 

Q.  In  case  your  company  should  make  a rate  of  $29.25  on  a car- 
load of  freight  to  a competing  point  distant  193  miles,  81  miles  over 
your  main  line  and  112  over  the  lateral  line,  what  proportion  of  that 
amount  do  you  think  should  go  to  each  in  order  to  a fair  division  ? 

A.  I don’t  know  of  any  better  method  of  getting  at  that  than  the 
actual  rate  that  a road  would  be  willing  to  take  on  that  business 
brought  to  them  by  any  road,  or  any  branch  road,  or  any  thing  of 
that  kind — for  instance,  we  hav(^  offered  to  make  a rate  for  125 
miles,  on  stock,  at  $9  a car ; well,  for  80  miles,  it  certainly  should 
be  $7,  because  the  terminal  is  an  important  element,  in  that  it 
makes  no  difference  whether  you  haul  80  or  125.  Before  the  con- 
solidation of  the  C,.  B.  & Q.  and  the  B.  & M.  road  of  Iowa,  both 
being  owned  practically  by  the  same  stockholders,  there  was  a con- 
tract existing,  and  a rate  on  stock  from  points  in  Iowa  was  $50  to 
Chicago;  of  that  $50  rate,  the  C.,  B.  & Q.  received  $27,  and  the 
B.  & M.  road  received  $28  for  a haul  from  10  to  50  miles — I think 
that  road  extended  out  50  miles. 

Mr.  Crews — What  was  the  haul  of  the  C.,  B.  & Q.  ? 


38 


A.  The  haul  of  the  C.,  B.  & Q.  was  207  miles.  I knew  another 
case  of  the  same  kind,  in  Missouri.  The  rate  on  stock  from  points 
west  of  Sedalia  on  the  M.,  K.  & T.  road  ranging  from  $60  to  $75 
a car  for  75  miles  west  of  Sedalia  or  south  of  Sedalia,  that  was  the 
through  rate  to  St.  Louis  by  that  road ; the  Missouri  Pacific  received 
$25  for  190  miles,  while  the  M.,  K.  & T.  would  receive  as  high  as 
$50  for  half  that  distance. 

Q.  Why  was  that? 

A.  That  was  a contract  entered  into  by  the  two  companies  on 
the  basis  that  it  was  new  business  brought  to  the  Missouri  Pacific 
road  in  train  loads  or  car  loads  without  any  expense  for  terminal ; 
they  simply  had  to  haul  it  between  Sedalia  and  St.  Louis. 

Q.  It  was  given  to  the  new  road  or  the  road  that  originated  or 
furnished  the  business? 

A.  Yes,  sir,  that  was  the  basis  of  the  contract  when  the  road 
was  built,  that  is  when  it  was  ready  for  business. 

Mr.  Caldwell — You  call  rates  other  than  pro-rates  arbitrary? 

A.  Agreed  rates  would  be  more  proper,  I think;  of  course,  these 
arrangements  are  all  matters  of  negotiations. 

The  Chairman — Would  you  consider,  taking  this  case  now  under 
consideration,  where  the  Springfield  division  of  the  Illinois  Central 
hauls  its  freight  112  miles,  from  Springfield  to  Gilman,  and  then 
the  main  line  of  the  Illinois  Central  takes  it  81  miles,  from  Gilman 
to  Chicago,  that  an  arbitrary  or  universal  rate  both  into  Chicago 
and  back  to  Gilman  should  be  $8  on  the  mam  line  of  the  Illinois 
Central ; do  you  say  in  your  judgment  that  that  would  be  a fair  rate 
or  division  to  make? 

A.  Yes,  sir,  if  any  division  whatever  is  made. 

Q.  Would  it  be  fair  to  say,  and  a rule  among  railroad  , men,  that 
the  rate  should  be  from  Gilman  to  Chicago  on  the  Central  what- 
ever they  could  get  the  car  haul  made  by  either  that  or  any  other 
competing  line? 

A.  Yes,  sir,  I think  that  that  is  as  near  a correct  basis  as  you 
could  get. 

Mr.  Varnell — I would  like  to  have  you  explain  to  us  what  is  known 
among  railroad  men  as  “traffic  arrangement;”  please  explain,  if  you 
can,  what  “traffic  arrangement”  means. 

A.  When  two  or  more  roads  have  business  to  interchange  be- 
tween them,  that  will  not  pay  the  tariff  rate  of  each  road,  they 
enter  into  negotiations  and  agree  upon  a basis  for  doing  the  busi- 
ness and  agree  as  to  how  the  rates  shall  be  divided,  and  about 
mileage  of  cars  and  interchange  of  cars,  and  the  billing  of  freight 
and  various  things  of  that  nature. 

Q.  Then  you  have  another  phrase  in  railroad  circles  known  as 
“working  arrangements,”  is  that  anything  different  from  traffic,  or 
is  it  embodied  in  the  same? 

A.  “Working  arrangement”  would  mean  about  the  same  as  “traffic 
arrangement,”  except  perhaps  you  might  have  a “working  arrange- 
ment” without  having  any  agreement  about  rates ; but  they  are 
practically  the  same  thing. 


S9 


Q.  What  do  you  mean  when’ you  say  “a  strictly  mileage  basis?” 

A.  It  is  a division  of  rates  based  on  actual  mileage ; there  are 
many  arrangements  made  on  what  they  call  constructive  miles,  that 
is  by  hauling  80  miles  and  calling  it  100. 

Q.  What  do  you  mean  by  percentage? 

A.  Percentage  is  the  division  of  the  rate.  For  instance,  we  have 
100  miles,  and  the  Illinois  Central  have  100,  we  agree  to  divide  the 
rate  equally,  they  would  get  50  per  cent,  and  we  would  get  50'  per 
cent.. 

Q.  Now,  then,  what  is  your  explanation  of  a car  haul  rate? 

A.  That  is  a rate  based  upon  car  loads  without  reference  to  con- 
tents or  weight. 

Q.  I think  I understood  you  to  say  awhile  ago,  in  answer  to  a 
question  propounded  to  you,  that,  taking  into  consideration  the  fact 
that  the  distance  from  Springfield*  to  Gilman  was  112  miles,  and  the 
distance  from  Gilman  to  Chicago  over  the  Illinois  Central  was  81 
miles,  and  the  charge  for  a car  load  of  freight  would  be  $29.25  from 
Springfield  to  Chicago  by  the  route  indicated,  taking  into  consider- 
ation all  the  circumstances,  that  $8  to  the  main  line,  and  $21.25  to 
the  lateral  line  or  the  Gilman  and  Springfield  branch,  would  be  a 
fair  and  equitable  division  ? 

A.  Yes,  sir,  under  the  practice  among  roads,  etc.,  it  would. 

Q.  I suppose  that  the  same  rule  applying  to  that  branch  referred 
to  would  apply  also  to  the  middle  division  or  Kankakee  line,  as  a 
matter  of  course? 

A.  Yes,  sir. 

Q.  Or  any  other  road  similarly  situated? 

A.  Yes,  sir. 

The  Chairman — Q.  You  say  that  is  substantially  the  way  your 
road  does  and  other  roads  with  which  you  are  acquainted? 

A.  Yes,  sir. 

Mr.  Varnell — You,  as  the  acting  General  Manager  of  the  Chicago 
and  Alton  Eailroad,  would  take  a car  haul  rate  of  $7  per  car  on 
81  miles  of  your  road  to-day? 

A.  Yes,  sir. 

Q.  The  fact  of  the  Illinois  Central  being  the  owner  of  the  stock 
of  the  Gilman  and  Clinton  road  and  the  Kankakee  or  middle  divi- 
sion, and  the  fact  that  a majority  of  the  directors  of  those  two 
branch  roads  are  also  directors  of  the  Illinois  Central  proper,  would 
in  your  judgment  cut  no  figure  in  the  case  so  far  as  the  equitable 
division  in  the  business  is  concerned? 

A.  No,  sir. 

Q.  Why? 

A.  Because  the  branch  line  with  its  limited  traffic  must  neces- 
sarily get  much  better  rates  per  mile  than  the  trunk  lines  that  do 
a large  volume  of  business. 

Mr.  Tucker,  of  the  Illinois  Central— You  are  probably  very  well 
acquainted  with  our  middle  division ; it  runs  four  miles  south  of 
Kankakee  to  Minonk,  with  a branch  starting  17  miles  west  of  Kanka- 
kee and  running  to  Colfax,  and  probably  finally  to  Bloomington, 


40 


making  103  miles.  The  Springfield  division  runs  from  Gilman,  cross- 
ing our  main  line  at  Clinton,  to  Springfield,  112  miles.  The  entire 
business  to  and  from  those  divisions  goes  over  the  main  line  of  the 
Illinois  Central  road.  We  allow  $8  on  the  Springfield  and  $6  on 
the  middle  division  business  to  the  main  line  for  car  hauls ; less 
than  car  loads  we  allow  15  cents  on  the  100  pounds  on  the  Spring - 
field  division,  and  12  cents  on  the  middle  division.  I would  like  to 
ask  you,  if  in  your  judgment,  you  think  that  is  a liberal  rate  to  the 
main  line  or  not? 

A.  I think  it  is  a very  fair  rate  for  the  main  line. 

The  committee  here  adjourned  until  9 o’clock  A.  M.,  to-morrow. 


The  committee  met  pursuant  to  adjournment,  at  room  24,  Grand 
Pacific  Hotel,  Chicago,  Friday,  March  30,  1883. 

Present — Same  as  before. 

Eansom  R.  Cable,  having  been  duly  sworn,  testified  as  follows  : 

EXAMINED  BY  MR.  VARNELL. 

Q,  What  is  your  name,  age,  residence  and  occupation? 

A.  My  name  is  Ransom  R.  Cable ; my  residence  is  Rock  Island ; 
occupation  that  of  a railroad  manager. 

Q.  IIow  many  miles  of  railroad  does  your  company  operate? 

A.  In  this  State  do  you  mean  ? 

Q.  Altogether. 

A.  About  1,350  miles. 

Q.  Have  you  any  leased  or  auxiliary  lines  of  road  ? 

A.  We  have,  yes,  sir. 

Q.  How  do  you  pro-rate  charges  on  freight  coming  from  your 
auxiliary  lines  on  to  your  main  line? 

A.  I think  there  are  none  of  our  leases  that  provide  for  a divi- 
sion of  earnings  under  any  circumstances.  I think  they  are  all 
simple  leases  where  we  guarantee  a certain  amount  of  interest  and 
the  accounts  not  kept  separate.  I believe  there  are  none  of  our 
leases  in  which  the  account  is  kept  separate.  It  is  all  one  general 
account. 

Q.  I will  ask  you  what  is  the  rule  among  railroad  managers  on 
business  of  that  character  coming  that  way,  that  is  off  of  auxiliary 
lines  on  to  the  main  line? 

A.  Off  of  lines  operated  by  the  company,  or  by  connecting  lines? 
Would  you  put  that? 

Q.  By  connecting  lines. 

A.  The  Rock  Island  and  Peoria  railway  gives  us  business  at 
Peoria  and  at  Rock  Island  for  Chicago  or  points  east  of  there,  and 
we  give  them  fifty  per  cent,  of  the  through  rate,  which  makes  our 
rate  on  a great  deal  of  the  business,  particularly  from  competitive 
points  on  lumber  and  heavy  commodities,  a little  less  than  a cent 
a mile ; probably  on  a large  proportion  of  it  not  over  three-quarters 
of  a cent  per  ton  per  mile.  They  give  us  that  business  at  Rock 
Island  or  Peoria  as  they  see  fit.  Their  haul  is  in  no  case  over  45 


41 


or  46  miles  distance,  while  our  haul  is  from  162  to  182  miles,  and 
we  divide  that  business  on  a basis  that  pays  us  from  three-quarters 
of  a cent  to  a cent  a ton  a mile.  In  some  cases  it  may  pay  less 
than  that.  Of  course  competition  enters  into  these  things  some- 
times. The  Eock  Island  and  Mercer  County,  another  railroad  I am 
interested  in,  as  run  in  connection  with  the  Eock  Island  road,  gets 
about  the  same  division  of  rates. 

Q.  I will  ask  you  why  it  is  that  the  main  line  can  and  does  take 
car  haul  freight  from  the  auxiliary  lines  at  a much  less  price  or 
charge  per  car  than  the  auxiliary  line? 

A.  The  only  argument  I would  have  for  that  would  be  the  large 
volume  of  business.  While  it  is  over  the  cost  of  doing  the  business 
on  the  main  line,  yet  we  can  consent  to  do  it  that  much  cheaper 
than  we  can  on  a branch  or  short  line  where  the  business  is  very 
light.  It  costs  so  much  to  operate  a road  anyhow ; if  you  only  run 
one  or  two  trains  a day,  or  whether  you  run  twenty  or  thirty  trains 
a day,  the  expense  is  very  little  increased.  I don’t  know  whether 
that  argument  will  hold  good  with  railroad  men  or  not,  but  that 
has  been  our  theory. 

Q.  Why  is  it  that  the  auxiliary  lines  should  have  a larger  share 
of  the  tariff  of  through  car  haul  freight?  Please  explain  fully. 

A.  For  the  same  reason  that  I gave  you  in  answer  to  the  other 
question ; their  earnings  are  so  small  per  mile  that  it  costs  them  a 
larger  percentage  of  the  gross  earnings  to  transact  their  business 
than  it  does  a line  earning  three  or  four  times  as  much  per  mile 
as  a branch  may  earn. 

Q.  If  your  auxiliary  line  was  112  miles  long  and  the  car  haul  to 
Chicago  or  on  the  main  line  was  81  miles,  and  the  tariff  rate  on 
the  whole  was  $29.25  per  car,  what  would  you  'say  should  be  the 
portion  due  the  main  line,  and  the  portion  due  the  auxiliary  line,  or 
how  should  the  tariff  be  divided  between  the  two  lines? 

A.  I should  be  very  glad,  if  I were  operating  the  main  line,  to 
do  business  on  that  basis  of  rates  at  30  per  cent.,  they  furnishing 
car  loads,  of  course,  and  no  transfer.  I should  be  very  glad  on  the 
main  line  to  haul  for  30  per  cent. 

Mr.  Pearson — Would  that  be  a fair  division  if  you  owned  the 
auxiliary  line  too? 

A.  Under  the  circumstances,  as  I look  at  it,  yes ; taking  into 
account  that  the  auxiliary  line  may  earn  probably  one-third  per 
mile  of  what  the  main  line  does,  and  not  only  that,  they  may  cost 
a great  deal  more  in  operating  expenses.  For  that  reason  they 
should  have  a larger  percentage  of  the  through  rate. 

Q.  Give  us  some  illustration  of  a car  haul  rate  on  your  main 
line  from  off  an  auxiliary  line,  if  you  can. 

A.  I haven’t  a case,  I believe,  in  point,  any  nearer  than  the  one 
I gave  you.  The  Eock  Island  and  Peoria  and  the  Eock  Island  and 
Mercer  County. 

Mr.  Caldwell — Would  the  fact  of  your  company  owning  a majority 
of  the  stock  in  the  leased  line,  enter  materially  into  your  figures  in 
making  up  the  difference  between  what  the  main  and  leased  lines 
should  earn. 

A.  No,  I should  say  not. 


42 


Mr.  Pearson — Do  you  think  if  the  auxiliary  line  was  owned  by 
the  same  corporation,  that  is  the  directors  in  the  main  line  also 
controlled  the  auxiliary  line,  the  same  directors  owned  a majority 
of  the  stock,  do  you  think  that  the  percentage  you  spoke  about 
would  be  just  and  equitable? 

A.  We  consider  it  fair,  and  we  do  for  this  reason : that  the  par- 
ties who  are  stockholders  of  one  of  the  companies  are  not  stock- 
holders in  the  other,  of  course,  and  we  cannot  afford  to  make  an 
arrangement  which  we  do  not  think  is  fair  to  both  the  parties. 

Mr.  Caldwell — Would  it  change  your  views  of  the  case  if  you 
knew  that  your  company,  as  a company,  owned  largely  above  a 
controlling  interest  of  the  stock  of  the  leased  or  lateral  line? 

A.  No,  sir,  I think  not. 

Mr.  Tucker — The  middle  division  is  103  miles  long;  it  runs  from 
Kankakee  west  of  south,  and  connects  with  the  main  line  56  miles 
south  of  Chicago.  The  Springfield  division  was  the  old  Gilman, 
Clinton  and  Springfield  road;  it  runs  ^112  miles,  from  Gilman 
to  Springfield.  Instead  of  making  percentages  or  anything  of  that 
kind,  we  pay  the  Illinois  Central  a rate  of  $8  per  car  from  Gilman 
to  Chicago,  and  fifteen  cents  a hundred  on  less  than  car  loads,  and 
on  the  middle  division  we  pay  |6  a car  and  12  cents  a hundred,  and 
I simply  ask  you  if  having  the  entire  business  of  these  two  divisions, 
with  its  competition  and  all,  and  with  arbitrary  rate  allowed  the 
main  line,  do  you  not  think  it  liberal  to  the  main  line,  in  view  of 

the  fact  of  the  State’s  7 per  cent,  or  otherwise. 

A.  I should  say  yes,  Mr.  Tucker,  for  the  reason  that  I think  it 

is  a larger  rate  than  we  get  on  similar  business  from  our  connec- 

tions. We  are  doing  that  business  on  the  theory  that  we  are  get- 
ting some  money  out  of  it. 

William  S.  Mellen,  having  been  duly  sworn,  testified  as  follows : 

EXAMINED  BY  MR.  VARNELL. 

Q.  What  is  your  name,  residence  and  occupation? 

A.  My  name  is  William  S.  Mellen;  my  residence  is  in  Chicago; 
occupation.  General  Freight  Agent  of  the  Chicago  and  Northwestern 
Kailway  Company. 

Q.  I will  ask  you  how  many  miles  of  railroad  your  company  op- 
erates. 

A.  We  are  operating  now  between  thirty- seven  and  thirty-eight 
hundred  miles,  with  the  leased  lines. 

Q.  Have  you  any  leased  or  auxiliary  lines  of  road? 

A.  We  have. 

Q.  How  do  you  prorate  charges  on  freight  coming  from  your 
auxiliary  lines  on  to  your  main  line  generally? 

A.  Well,  there  are  several  different  ways  of  doing  that ; on  some 
of  the  lines  we  have  a percentage  arrangement ; on  others  we  have 
a contract,  what  we  call  a traffic  contract  for  a car  haul,  where 
they  pay  us  a fixed  sum  per  car,  or  a fixed  sum  per  hundred  pounds 
for  hauling  freight ; that  is  an  indexible  rule,  that  is,  it  is  not  elas- 
tic ; in  others  we  have  a percentage  arrangement,  where  the  propor- 
tion between  the  lines  is  governed  by  competition ; it  is  raised  or 
lowered  as  the  through  rates  are  raised  or  lowered. 


43 


Q.  What  is  the  rule  among  railroad  managers  on  business  of 
that  character  coming  that  way,  that  is,  off  of  auxiliary  lines  on  to 
the  main  line? 

A.  There  is  no  fixed  rule  in  this  respect. 

Q.  There  is  none? 

A.  ■ There  is  no  fixed  rule  in  this  respect.  As  I said  before,  there 
are  two  or  three  ways  of  handling  that,  two  ways  especially  as  we 
handle  it,  one  by  percentage,  and  another  by  fixing  arbitrary  car 
haul  rates,  or  car  hauls  per  hundred  pounds,  as  an  arbitrary  rate. 

Q.  Why  is  it  that  the  main  line  can  and  does  take  car  haul 
freight  from  the  auxiliary  lines  at  a much  less  charge  or  price  per 
car  than  the  auxiliary  line? 

A.  Well,  there  might  be  various  reasons  for  such  a state  of 
affairs ; one  might  be,  that  the  auxiliary  line  might  be  a line  which 
had  to  assume  all  the  burden  of  procuring  this  freight ; and  under 
such  circumstances  it  is  frequently  customary  to  put  the  business 
into  the  hands  of  the  auxiliary  line  to  secure  the  business,  they 
having  to  stand  and  bear  all  the  expense,  and  the  main  line  fixes 
what  we  call  a low  arbitrary  rate  for  hauling  the  business,  and  stand 
none  of  the  proportion  of  expenses  of  securing  it.  The  main  line 
all  the  time,  whether  rates  are  up  or  down,  secures  a fixed  arbitrary 
rate,  the  auxiliary  line  getting  whatever  they  can  get,  that  is  left, 
out  of  the  business.  That  is  especially  the  case  where  the  compe- 
tition might  be  very  active. 

Q.  I will  ask  you  why  it  is  that  the  auxiliary  lines  should  have 
a larger  share  of  the  tariff  of  through  car  haul  freight ; please  ex- 
plain this  as  fully  as  you  can. 

A.  It  does  not  always  follow  that  they  do,  because  it  is  a fixed 
charge ; the  proposition  is  not  correct  therein ; it  does  not  always 
follow  that  because  there  is  a fixed  arbitrary  rate  given  to  the 
main  line,  that  the  auxiliary  line  gets  the  largest  amount  of  the 
earnings.  There  are  frequently  incidental  expenses  of  a nature 
which  are  not  ordinarily  figured  in  securing  this  business,  espe- 
cially in  competitive  territory,  which  consume  a very  large  part 
of  the  earnings  of  an  auxiliary  line.  It  also  frequently  happens 
that  the  auxiliary  line  runs  through  a territory  where  there  is 
not  such  a large  amount  of  business  as  there  is  on  the  main 
line ; that  is  usually  the  case ; the  main  line  is  usually  an  old 
developed  line,  and  can  afford  to  handle  the  business  at  a less 
rate.  As  an  instance  of  that  you.  take  a piece  of  road  to-day  in 
Dakota,  a hundred  miles  long,  and  parallel  it  or  offset  it  against 
a piece  of  road  a hundred  miles  between  Chicago  and  Detroit  or 
Buffalo,  the  line  between  Chicago  and  Detroit  could  -probably  af- 
ford to  do  the  business  for  one  half,  possibly  one  quarter  the 
rate  per  ton  per  mile  that  the  auxiliary— what  we  would  call  the 
auxiliary  line — could  in  the  interior  where  there  is  a smaller  business, 
a smaller  tonnage,  and  even  if  they  reduced  their  rates  to  the 
minimum,  they  could  not  carry  more  tonnage  than  there  was  in  the 
territory  through  which  it  run. 

Q,  If  you  have  an  auxiliary  line  that  is  112  miles  long,  and 
the  car  haul  to  Chicago  on  the  main  line  was  81  miles  long,  and 
the  tariff  rate  of  the  whole  was  $29.25  per  car,  what  would  you  say 


44 


should  he  the  portion  due  the  main  line  and  the  portion  due  the 
auxiliary  line,  or  how  should  the  tariff  be  divided  between  the  two 
lines  ? 

A.  It  would  depend  entirely  upon  circumstances.  Of  course  I could 
not  answer  that  question  directly,  because  there  might  be  reasons  in- 
volved which  are  not  shown  in  the  question.  It  might  under  some  cir- 
cumstances be  expedient  to  make  a percentage  division.  If  I was 
going  to  handle  that  under  a car-haul,  for  instance  if  I had  a railroad 
going  west  from  Chicago,  as  our  Galena  division,  is,  just  136  miles  to 
the  Mississippi  river,  and  we  had  a connection  in  the  State  of  Iowa, 
that  came  to  us  at  the  river,  and  we  were  going  to  make  a car-haul 
there,  and  we  assumed  this  new  line,  of  course  understanding  it  was 
in  competitive  territory  with  other  lines,  obliged  to  assume  the  burden 
of  the  competition,  I think  I should  be  very  glad  to  secure  that  busi- 
ness at  a very  low  car-haul,  figuring  that  I was  to  assume  none  of  the 
burdens  of  securing,  but  those  expenses  are  all  chargeable  to  the  line 
originating  the  business.  Understand  me  here,  that  it  is  the  history  of 
all  our  lines  terminating  in  Chicago  that  the  tonnage  of  these  lines, 
especially  the  lines  west  of  Chicago,  that  the  tonnage  moves  towards 
Chicago,  the  heavy  tonnage ; the  lighter  tonnage  and  the  empty  cars 
go  from  Chicago. 

Q.  The  Illinois  Central  have  an  auxiliary  line  known  as  the  Gil- 
man and  Clinton  road,  which  runs  from  Springfield  to  Gilman  112 
miles ; there  they  strike  the  main  line,  and  from  there  to  Chicago 
it  is  81  miles,  making  193  miles,  and  the  freight  is  $29.25  on  a car 
of  freight  from  Springfield  to  Chicago,  via  Gilman,  and  they  appor- 
tion eight  dollars  of  that  amount  to  the  main  line.  In  your  judg- 
ment as  a practical  railroad  man,  is  that  a fair  division? 

A.  That  is  for  81  miles? 

Q.  For  81  miles. 

A.  I will  answer  that  question  that  I think  it  is.  Had  you  asked 
me  about  naming  the  rate,  I should  have  named  about  a cent  a 
ton  a mile ; that  is  what  I would  consider  a very  fair  car-haul  for 
a distance  not  less  than  fifty  miles.  I have  known  in  my  experi- 
ence as  a railroad  man  of  a number  of  instances  of  car-hauls  even 
lower  than  that. 

Q.  As  a representative  man  in  the  freight  department  of  your 
company,  if  such  a haul  as  that  was  offered  to  your  road  under 
like  circumstances,  you  would  have  no  hesitation  in  taking  it  at  $8 
a car,  would  you? 

A.  Not  the  slightest;  and  I have  been  trying  to  consummate  an 
arrangement  to  carry  freight  under  exactly  similar  circumstances 
to  those ; when  we  some  time  ago  tried  to  make  a traffic  arrange- 
ment with  a road  which  afterwards  made  one  with  our  competitor, 
we  would  have  been  very  glad  to  have  taken  the  haul  85  miles  for 
eight  dollars.  That  was  the  proposition  we  proposed  to  make.  We 
would  be  glad  to  consummate  that  arrangement  to-day. 

Q.  In  relation  to  these  car  haul  or  arbitrary  rates,  I presume 
the  question  of  competition  cuts  considerable  figure,  does  it  not? 

A.  It  does  not,  sir,  because  the  line  originating  the  business  under 
a car  haul  arrangement  assumes  all  the  burdens  of  competition.  If 
the  rates  should  go  down  to  ten  dollars  per  car,  and  they  had  to 


45 


pay  the  road  eight  dollars  per  car,  they  would  only  secure  for  their 
haul  two  dollars,  the  car  haul  being  an  indexible  figure. 

Mr.  Caldwell— You  speak  of  a rate  of  eight  dollars  that  you  would 
have  been  glad  to  have  taken  for  eighty-five  miles  of  car  haul? 

A.  Yes,  sir. 

Q.  Was  that  a line  your  company  was  interested  in  as  a com- 
pany ? 

A.  No,  sir,  we  were  not. 

Q.  Would  the  fact  that  your  company  owned  more  than  one-half 
of  the  stock  of  that  company  cut  any  figure  in  your  answer  or  not  ? 

A.  That  would  not  influence  us  at  all.  It  was  simply  a matter 
of  getting  revenue  on  our  main  line — getting  it  apportioned  to  our 
main  line. 

Q.  Then,  if  this  auxiliary  line  had  been  owned,  say  seven-eighths 
of  the  stock,  by  the  Northwestern  company  as  a company,  you 
would  have  still  not  changed  the  figure? 

A.  Well,  I could  not  answer  that  question  directly,  without  a 
little  explanation.  There  are  times  when  a company  has  an  inter- 
est in  another  company,  where  they  can  bring  pressure  to  bear  to 
force  a better  division  than  they  would  get  on  strict  business  prin- 
ciples, and  as  a strict  business  proposition  in  a matter  of  dollars 
and  cents,  I should  not  be  influenced  by  that  at  all,  because  I con- 
sider the  proportion  allowed,  if  all  the  expenses  of  securing  the 
business  are  paid  by  the  auxiliary  company,  and  if  this  company 
at  all  times  was  to  have  that  arbitrary  rate  of  eight  dollars  a car, 
a very  fair  -division.  I think  times  might  arise  when  it  would  rob 
the  auxiliary  line.  I have  known  cases  of  that  kind,  because  I 
have  known  freight  carried,  and  I could  cite  cases  if  necessary,  al- 
though they  are  not  in  this  State,  where  freight  has  been  carried 
by  an  auxiliary  line  to  a main  line  with  which  they  had  a contract, 
at  about  the  figure  I have  named.  The  same  road  I mentioned 
that  we  tried  to  make  a contract  with,  where  the  auxiliary  line  car- 
ried freight  for  less  money,  and  got  less  earnings  out  of  it  than  the 
main  line  did  on  account  of  very  severe  competition,  and  with  the 
expenses  of  securing  that  business  the  auxiliary  line  certainly  did 
the  business  at  a loss.  I would  not  consider  tliis  a fair  rate  for  a 
road  that  had  to  bear  the  expenses  of  securing  the  business,  but 
where  it  is  simply  the  question  of  putting  a loaded  car  in  your  reg- 
ular train,  I do  not  consider  it  a fair  rate,  because  you  have  noth- 
ing to  do  except  to  take  the  car  as  it  is  delivered,  and  deliver  it  at 
the  other  end  of  the  line. 

Q.  Do  you  think  the  fact  of  your  company  owning  forty-nine 
fiftieths  of  the  stock-  of  this  lateral  line,  as  a company,  would  not 
change  your  mind  in  regard  to  the  rate? 

A.  It  would  not  change  my  mind  as  a freight  man  of  the  divi- 
sion of  this  rate,  no  sir. 

Q.  I mean  as  to  what  is  fair  between  the  leased  and  the  main 
line? 

A.  No,  sir,  it  would  not. 

Mr.  Tucker — I would  like  to  ask  Mr.  Mellen  one  question,  only. 
The  Middle  division  is  103  miles,  as  you  have  heard  explained,  and 


46 


the  Springfield,  112.  The  former  was  built  and  the  latter  was  bought, 
for  the  purpose  of  protecting  the  revenue  of  the  Illinois  Central, 
proper ; the  stock,  I believe,  is  entirely  owned  by  the  Illinois  Central 
road.  Unfortunately,  I believe  neither  of  them  have  ever  declared 
any  dividend.  The  Gilman  is  behindhand;  the  Midland  about  even. 
Would  you  think  it  fair  to  give  the  main  line  of  the  Illinois  Central 
the  same  rate  as  you  could  get  another  road  to  halul  it  at,  - that  is, 
to  haul  the  business  at? 

A.  The  same  as  the  Gilman  road  could  contract  this  business- 
for? 

Q.  Yes.  Suppose  the  Gilman  and  Middle  divisions  could  contract 
with  another  line  for  a certain  car-haul  rate  for  the  same  distance : 
would  it  he  fair  to  give  that  same  rate  to  the  Illinois  Central? 

A.  Why,  I think  it  would  be.  And  if  you  have  another  line — (I  am 
not  familiar  with  your  territory,  because  I have  never  had  anything 
to  do  south  of  Chicago;  my  business  has  always  been  north  and 
west)— but  I venture  to  say,  if  you  put  that  business  up  at  auction, 
and  you  have  another  line  there,  that  connects  at  Gilman  with  your 
road  that  starts  from  there  (your  leased  road),  that  you  will  not 
have  the  slightest  difficulty  in  auctioning  that  business  off  at  fully 
as  low  a rate  as  a cent  a ton  a mile.  I will  pledge  my  reputation 
on  that,  because  I would  take,  it  in  a minute,  if  I was  there,  and  I 
know  any  railroad  company  would. 

Which  was  all  the  testimony  introduced  before  the  committee : and 
the  committee  then  adjourned. 


Meeting  of  the  Sub-committee  of  the  Finance  Committee  of  the 
House  of  Kepresentatives  of  the  State  of  Illinois,  held  at  the  office 
of  the  Illinois  Central  Eailroad  Company,  in  Chicago,  Thursday, 
March  22d,  1883. ' 

Present — Hon.  S.  F.  Crews,  chairman;  Hons.  I.  N.  Pearson,  E. 
B.  Kennedy,  B.  F.  Caldwell  and  G.  H.  Varnell. 

John  C.  Welling  having  been  duly  sworn,  testified  as  follows : 

EXAMINED  BY  THE  CHAIRMAN. 

Q.  What  is  your  full  name? 

A.  John  C.  Welling. 

Q.  What  is  your  occupation,  and  how  long  have  you  been  so  con- 
nected with  the  Illinois  Central  railroad? 

A.  My  position  is  general  auditor;  I have  been  connected  with 
the  company  about  nine  years. 

Q.  Please  state  in  full  and  in  detail,  as  nearly  as  you  can,  the 
manner  in  which  your  railroad  company  prorate  freight  and  freight 
charges  with  the  lateral  lines  under  or  controlled  by  your  com- 
pany ? 

A.  I suppose  you  refer  to  the  Chicago  and  Springfield  and  the 
Kankakee  and  Southwestern  railroads.  These  are  the  only  roads  we 
control  in  this  State. 


47 

r 

Q.  Under  or  controlled  by  your  company? 

A.  Yes. 

Mr.  Caldwell — What  is  the  extent  of  the  Kankakee  branch? 

A.  One  hundred  and  eleven  miles. 

Q.  Running  to  a point  from  Kankakee? 

A.  From  Otto^  four  miles  south  of  Kankakee,  to  Kankakee  Junc- 
tion, and  a branch  from  Kempton  to  Colfax,  in  McLean  county. 
All  business  except  freight  to  and  from  Chicago  is  prorated  on  a 
mileage  basis ; this  is  divided  on  the  basis  of  a car-haul ; the  Chi- 
cago division,  between  Chicago  and  Gilman,  being  allowed  eight 
dollars  per  car.  On  the  Kankakee  and  Southwestern  freight  busi- 
ness to  and  from  Chicago,  the  Chicago  division  gets  six  dollars  per 
car.  The  passenger  business  is  prorated. 

vQ.  Prorated  by  the  mile? 

A.  Upon  a mileage  basis.  Sums  fixed  by  contract  with  the  Post- 
office  Department  and  the  express  company  are  allowed  each  of 
these  divisions  for  the  transportation  of  mails  and  express. 

The  Chairman — is  that  all  you  desire  to  say  in  answer  to  that 
question  ? 

A.  All  local  earnings  like  rent  of  property,  etc.,  are  credited 
direct  to  those  divisions ; that  is  all,  I think. 

Q.  Please  state  fully  and  in  detail  the  various  sources  of  revenue 
to  the  Illinois  Central  Railroad. 

A.  I will  read  from  the  balance  sheet : “Earnings  from  freight 

transportation,  passenger,  express,  mail,  rent  of  tracks,  rent  of 
property,  switching,  storage,  dockage,  train  rents  and  earnings  from 
sleeping  cars.”  I think  that  covers  all  the  ground. 

Mr.  Clark— Did  you  get  in  there  extra  baggage,  mail  and  express  ? 

A.  Yes ; extra  baggage  is  included  in  passenger  earnings. 

Mr.  Crews — Can  you  give  the  earnings  of  the  road  for  various 
years,  running  back  four  or  five  years? 

A.  I could  give  you  the  earnings,  say  since  the  fire,  without  much 
trouble. 

Q.  I mean  the  gross  receipts? 

A.  Yes ; I can  give  them  for  five  or  six  years  readily. 

Mr.  Ackerman — You  can  make  a statement  of  that  and  furnish  it 
to  the  committee. 

A.  Yes,  I think  that  would  be  better. 

Mr.  Caldwell — Do  you  ask  for  the  total  earnings  of  the  whole  line, 
or  simply  of  the  part  that  the  State  receives  seven  per  cent,  on? 

Mr.  Crews — On  the  portion  that  the  State  receives  seven  per 
cent.  on. 

Mr.  Varnell — We  have  no  interest  in  anything  else. 

Mr.  Crews — I would  like  for  you  to  give  the  comparative  tonnage 
and  earnings,  and  also  the  comparative  rate  for  those  years  and  the 
tonnage,  say  since  1875.  Let  that  be  included  as  a part  of  your 
statement  under  oath. 

Mr.  Ackerman — I think  when  you  get  those  figures  you  will  have 
a pretty  full  statement. 


48 


Mr.  Caldwell — I will  ask  you  to  state  the  lines  upon  which  the 
revenues  of  the  State  is  based,  a description  of  the  lines? 

A.  It  is  the  line  from  Chicago  to  Cairo  and  from- East  Dubuque 
south  to  the  junction  with  the  Chicago  division,  say  705 J miles. 

Mr.  Kennedy — In  the  State? 

A.  Yes,  that  is  what  we  call  the  Illinois  Central  line  proper. 

Q.  Where  is  the  junction? 

A.  It  is  near  Centralia. 

Mr.  Clark — Two  miles  north  of  Centralia. 

Mr.  Yarnell — I will  ask  you  this  question,  Mr.  Welling:  Whether, 
of  your  own  knowledge,  any  of  the  authorities  of  the  State  of  Illi- 
nois, the  Governor,  Auditor,  Secretary  of  State,  or  any  one  else 
empowered  by  authority  of  law,  have  ever  verified  the  accounts  be- 
tween the  Illinois  Central  Railroad  and  the  State,  otherwise  than 
those  that  were  examined  during  the  past  year  by  Mr.  Leonard  and 
Mr.  Nash. 

A.  Not  to  my  knowledge. 

Q.  They  never  have? 

A.  Not  to  my  knowledge. 

Q.  I say  within  your  knowledge  ? 

A.  No ; Mr.  Leonard  and  Mr.  Nash  made  a very  thorough  ex- 
amination when  they  were  here. 

Mr.  Crews — What  length  of  time? 

A.  Two  years. 

Q.  What  did  their  examination  consist  of? 

A.  They  looked  carefully  into  the  rules  that  were  applied  in  the 
accounting  department  in  making  the  division  of  earnings  as  between 
the  different  divisions  of  the  line  and  with  foreign  and  connecting 
roads.  They  did  not  attempt  to  check  off  all  the  calculations  that 
were  involved.  For  insta;nce,  they  did  not  take  the  business  at  each 
station  and  follow  it  through  all  the  accounts  so  as  to  verify  all  the 
figures.  Aside  from  that  detail,  they  made  the  fullest  examination 
that  any  one  could  possibly  make.  To  have  gone  through  all  the 
necessary  calculations  would  probably  have  required  the  work  of  a 
dozen  men  for  at  least  six  months. 

Mr.  Varnell — Do  I understand  you  to  say  that  the  only  lines  that 
this  company  is  interested  in  are  the  two  lines  that  you  refer  to — 
the  Kankakee,  or  middle  line,  and  the  Springfield  division? 

A.  Yes. 

Q.  They  are  the  only  two  lines? 

A.  They  are  the  only  lines.  I assume  you  mean  in  Illinois. 

, Q.  I mean  in  Illinois? 

A.  Yes. 

Q.  I do  not  mean  the  Iowa  division  or  the  southern  division  at 
all,  because  they  are  lines  that  we  have  no  interest  in. 

A.  In  Illinois  there  are  but  two,  as  before  stated. 

Mr.  Pearson — How  does  your  road  get  into  St.  Louis? 

A.  Over  the  Yandalia  line,  via  Effingham. 


49 


Mr.  Crews — How  do  you  prorate  your  freight  charges  with  lines 
under  your  control  on  freight  coming  from  other  States  onto  your 
main  lines  in  this  State? 

A.  It  is  prorated. 

Q.  Per  mile  ? 

A.  Yes. 

Mr.  Varnell — Per  mile  per  ton? 

A.  The  distance  is  the  basis. 

Q.  For  instance,  just  to  simplify  the  thing,  if  you  were  running 
a distance  of  ten  miles,  and  got  ten  cents,  it  would  be  divided  into 
ten  parts? 

A.  Yes.  The  exception  to  the  rule  would  be  in  the  division  of 
strictly  local  business.  For  instance,  in  our  traffic  arrangements 
with  the  Belleville  line,  if  they  take  business  from  us  at  a local 
point  near  the  junction,  they  allow  us  more  than  a prorate,  and  the 
rule  applies  both  ways. 

Mr.  Clark — Perhaps  you  might  as  well  explain  in  this  connection 
that  the  reason  these  per  cents  are  made  is  as  follows : Taking  the 

Belleville  line  as  an  illustration  : Say  there  is  a station  ten  miles 

from  DuQuoin,  and  you  haul  freight  from  Cairo  to  that  station,  the 
percentage  allowed  the  Belleville  road  would  amount  to  more  than 
the  strict  prorata,  because  that  road  has  a short  haul  and  the  sta- 
tion service  to  perform. 

Mr.  Yarnell — That  is  to  say,  they  would  get  more  prorata  on  a 
ten  mile  haul,  as  compared  with  sixty  miles  of  the  main  line. 

Mr.  Clark — That  is  it. 

Mr.  Caldwell — Where  you  do  not  'strictly  prorate  by  the  mile,  do 
you  take  a general  rule  or  a special  rule  for  each  case? 

A.  It  would  be  according  to  the  understanding  between  the  two 
lines. 

Q.  It  would  be  a special  arrangement? 

A.  It  would  be  a special  arrangement. 

Mr.  Varnell — Kailroad  companies  have  no  general  rule  by  which 
they  distribute  as  between  main  and  lateral,  have  they?  There  is 
no  general  rule  that  they  work  by? 

A.  I think  there  is  no  specific  rule. 

Q.  No  specific  rule,  I mean.  They  have  to  make  the  rates  to  suit 
fhe  circumstances  and  surroundings  ? 

A.  Yes. 

Q.  It  depends  altogether  on  the  circumstances  and  surroundings 
as  to  the  amount  that  may  be  given  or  taken? 

A.  Yes. 

Mr.  Caldwell — In  the  absence  of  peculiar  circumstances,  you  pro- 
rate usually  by  mileage  ? 

A.  Yes,  that  is  the  rule. 

Mr.  Varnell— Is  this  rule  uniform  on  your  lines  as  to  passenger 
hauls  in  the  State?  They  all  conform  to  the  schedule  rates,  do 
they — three  cents  a mile  in  the  State  of  Illinois? 

A.  On  passengers,  yes. 

—4 


50 


Mr.  Clark — Except  excursion  business? 

A.  Yes. 

Mr.  Varnell — There  may  be  special  cases? 

A.  0,  yes ; that  is  understood. 

Mr.  Ackerman — And  commutation  on  short  business? 

Mr.  Crews — That  leads  to  a question  that  is  important  in  this 
matter.  If  you  prorate  per  mile  on  the  passenger  traffic,  please 
explain  why  you  do  not  prorate  on  freight  traffic  as  well? 

A.  I think  it  is  hardly  within  my  province  to  answer  that  ques- 
tion. I simply  deal  with  these  arrangements  after  they  are  made. 
Mr,  Clark  could  give  you  a much  better  explanation  than  I could. 

Mr.  Varnell — I will  ask  you  another  question  that  suggests  itself 
to  me.  What  is  the  rule  with  the  company,  as  far  as  your  knowl- 
edge extends,  in  regard  to  rebates?  Are  the  rebates  paid  out  of  the 
gross  earnings  first,  or  are  they  paid  out  of  the  residue  that  is  left 
to  this  company  after  the  seven  per  cent,  is  paid  over  to  the  State  ? 

A.  All  drawbacks  and  overcharges  resulting  from  error  or  other- 
wise, are  deducted  from  the  gross  earnings. 

Q.  They  are  deducted  from  the  gross  earnings? 

A.  Yes,  and  we  consider  gross  earnings  whatever  remains  after 
paying  the  rebates.  I think  all  railroads  do. 

Mr.  Crews — In  other  words  those  reductions,  drawbacks  or  rebates^ 
are  counted  out  before  you  come  to  the  gross  earnings? 

A.  They  are  simply  corrections. 

Q.  'They  do  not  come  into  and  make  a part  of  the  gross  earnings  ? 

A.  No. 

Mr.  Varnell — What  I want  to  know  about  is  this : I know  if  used 

to  be  the  rule  that  railroad  companies,  when  parties  would  go  in 
and  make  contracts  for  transportation  for  a great  number  of  cars 
of  freight,  say  five  hundred  or  a thousand  cars,  and  guarantee  to 
furnish  to  the  road  a thousand  cars  of  freight  at  the  regular  price, 
at  the  schedule  rate  or  at  the  tariff  rate,  as  the  case  might  be,  that 
they  would  receive  two  or  three  or  four  or  five  dollars  a car  upon 
that,  provided  they  furnished  a number  of  cars,  and  I suppose  it  is 
nothing  more  nor  less  than  offering  a premium  for  the  business,  and 
I want  to  know  whether  you  take  that  from  the  gross  earnings  or 
otherwise  ? 

Mr.  Clark.  You  might  explain,  that  it  is  taken  from  the  earnings,, 
because,  the  amount  paid  back  is  not  earnings.  If  you  made  an 
open  rate  it  would  be  so  much  less  than  by  the  amount  you  would 
pay  for  the  rebate  and  the  same  result  would  be  reached. 

Mr.  Welling — Yes,  if  an  agent  makes  a mistake  of  a dollar  and 
a half  in  billing,  it  requires  a correction  from  the  accounting  depart- 
ment, or  a voucher  from  the  general  freight  office,  and  that  is  an 
over-charge  voucher,  as  much  as  a rebate  to  a shipper. 

Mr.  Caldwell — I would  like  to  ask  you  whether  the  rate  of  earn- 
ings to  the  first  branch  south  of  Gilman  are  uniform  to  all  local 
points  on  the  line  from  here  to  Cairo ; whether  the  rate  of  earnings 
on  a car  from  here  to  all  local  points  south  are  uniform  from  here, 
to  Cairo  ? 


51 


A.  No,  they  are  fixed  by  the  Commissioners’  schedule,  according 
to  distance. 

Mr.  Clark.  I don’t  think  you  quite  comprehended  Mr.  Caldwell’s 
question.  Mr.  Caldwell’s  question  to  you  was,  if  I myself  compre- 
hended it,  this : do  you  apply  the  same  rates  to  all  local  stations 
between  here  or  points  south  of  Gilman,  to  which  this  car-haul  rate 
applies  ? 

A.  I think  my  first  answer  covered  that  question.  I said  the 
only  car-haul  arrangement  is  on  Chicago  business.  All  other  busi- 
ness is  pro  rated  on  a mileage  basis,  if  that  is  the  point. 

Mr.  Caldwell — I speak  of  local  points  that  are  not  competitive. 

A.  Shipments  from  or  to  any  point  on  the  Springfield  division 
to  any  other  point  on  the  Illinois  Central  line  proper,  would  be 
pro  rated  on  a mileage  basis. 

Q.  Any  shipment  from  Gilman  to  Buckley,  for  instance,  would 
be  pro  rated  by  the  mile? 

A.  Yes,  the  car-haul  arrangement  only  covers  Springfield  divis- 
ion business  to  and  from  Chicago. 

Q.  Bo  the  same  arrangements  exist  on  the  line  from  Foreston  to 
Chicago — that  is  a leased  line,  is  it?  It  is  laid  down  here  so  on 
the  map. 

A.  You  are  speaking  now  of  the  Burlington. 

Q.  It  is  shown  on  the  map  as  a leased  line? 

A.  It  is  the  Burlington  road. 

Q.  That  intersects  the  main  line  at  Foreston? 

A.  Yes. 

Q.  There  is  no  car-haul  applies  there — it  is  pro  rated? 

A.  We  pay  them  a car-haul  for  doing  the  business. 

Mr.  Clark — Mr.  Caldwell,  when  he  asked  that  question,  was  look- 
ing at  it  as  a line  from  here  to  Foreston,  and  as  being  a line  con- 
trolled by  the  Illinois  Central;  it  is  not.  It  is  the  Chicago,  Bur- 
lington and  Quincy  road  from  here,  but  that  map  shows  it  in  con- 
nection with  ours  simply  because  it  is  a line  over  which  we  work 
to  the  northwest.  The  Illinois  Central  line  on  the  east  side  of  the 
river  from  East  Dubuque,  after  crossing  the  bridge,  whatever  busi- 
ness comes  from  the  State  of  Iowa,  is  pro  rated  with  that  eighty- 
two  miles  of  the  Illinois  Central  Kailroad  from  its  point  of  destina- 
tion to  Foreston;  from  Foreston  it  is  hauled  into  Chicago  over  the 
Chicago,  Burlington  and  Quincy  Railroad.  I think  that  is  the  point. 

Mr.  Caldwell — Is  it  by  car  haul  or  is  it  prorated? 

Mr.  Clark — By  car  haul  rate  made  by  the  Chicago,  Burlington 
and  Quincy  to  haul  this  stuff. 

Mr.  Crews — But  you  fix  that  car  haul  rate,  do  you  not,  by  the 
mileage  ? 

A.  No,  it  is  specific. 

Mr.  Caldwell — What  is  the  car  haul  rate  founded  on — competi- 
tion? 

Mr.  Clark — Competition  with  the  Northwestern,  Milwaukee  and 
St.  Paul,  and  the  Burlington;  we  go  right  in  between  them. 

UNIVERSITY  OF  ILLINOIS 
LIBRARY 


52 


Mr.  Varnell — It  cuts  off  your  Iowa  line  connection  with  Chicago? 

A.  Yes. 

Q.  You  really  have  no  connection  with  Chicago  from  your  Iowa 
line  only  by  that  road? 

A.  Only  by  some  one  of  these  roads,  unless  we  go  round  the 
other  way  by  Kankakee. 

Mr.  Caldwell — I will  ask  you  whether  or  not  the  car  haul  rate  by 
the  mile  from  Foreston  to  Chicago  is  more  or  less  than  the  pro- 
portion on  the  main  line  from  Foreston  back  to  Dubuque  on  Iowa 
traffic. 

A.  All  business  from  Iowa  to  Chicago,  or  vice  versa,  is  prorated; 
the  north  division  getting  its  proportion  and  the  Iowa  division  its 
proportion. 

Mr.  Caldwell — When  you  say  prorata  you  mean  on  the  mile? 

A.  On  the  mileage  basis. 

James  C.  Clarke,  having  been  duly  sworn,  testified  as  follows: 


EX'AMINED  BY  THE  CHAIRMAN. 

Q.  Please  state  your  full  name? 

A.  James  C.  Clarke. 

Q.  State  your  position  on  this  road,  how  long  you  have  been 
connected  with  it,  and  in  what  way? 

A.  I am  first  Vice-President  and  General  Manager.  My  first 
connection  with  the  Illinois  Central  Kailroad  was  in  1855.  I was 
then  absent  from  it  several  years  and  returned  into  the  service  of  the 
company  again  in  1874.  For  the  last  five  years  or  five  and  a half 
years  I have  been  devoting  almost  my  entire  time  to  the  line  from 
Cairo  to  New  Orleans,  which  is  at  the  present  time  leased  to  the 
Illinois  Central  Kailroad  Company,  the  lease  having  gone  into  effect 
last  July.  In  the  reorganization  of  the  service  here,  made  I think 
in  January,  I was  elected  as  Vice-President  and  General  Manager 
of  the  entire  system  of  the  Illinois  Central  Company,  including  all 
its  proprietary  and  leased  lines,  and  as  General  Manager  have  a 
supervision  and  direction  of  all  its  operations  and  workings. 

Q.  Mr.  Clarke,  I will  ask  you  to  explain  in  what  manner  you 
prorate  freight  charges  between  the  lateral  lines  and  the  main  line 
of  the  Illinois  Central  Kailroad  in  the  State  of  Illinois,  and  also 
with  other  roads  controlled  by  your  company,  carrying  freight  from 
outside  of  the  State  on  your  main  lines  in  the  State ; when  I say 
main  lines,  of  course  I include  the  Chicago  branch. 

A.  You  mean  the  main  line  of  the  Illinoi;^  Central  Kailroad  in 
the  State  of  Illinois,  and  the  branches  belonging  to  the  Illinois  Cen- 
tral Company? 

Q.  Yes,  that  is  what  I mean,  explain  how  you  do  it. 

A.  Now,  sir,  to  illustrate  that  matter,  we  have  what  is  known  in 
railroad  operation  as  traffic  agreements,  working  arrangements,  strict 
mileage  basis,  percentage  and  car-haul  rates ; I believe  that  covers 
it.  Now,  for  instance,  we  work  from  Chicago  to  Cincinnati,  56  miles 
over  the  Illinois  Central  Kailroad  to  Kankakee,  thence  we  have  a 


53 


“working  arrangement”  with  a line  of  railway  running  from  that 
point  to  Cincinnati.  The  through  rate  is  prorated  on  a mileage 
basis.  If  we  start  from  Chicago,  or  any  point  between  here  and 
Kankakee,  a car  of  freight  to  go  to  any  local  point  on  the  Cincin- 
nati line,  not  a competing  point,  we  add  the  local  rate  from  the 
point  of  departure  of  the  traffic  to  Kankakee  to  the  local  rate  from 
Kankakee  to  the  station  to  which  this  traffic  is  going;  the  two  local 
rates  combined  make  the  through  rate  between  those  two  points. 
That  would  come  under  the  head  of  “working  arrangements”  with 
other  lines  that  we  do  not  control,  other  than  by  the  reciprocation 
of  business.  Now,  we  take  a car-load  of  freight  destined  from  Chi- 
cago to  New  Orleans.  The  rate  say,  from  Chicago  to  New  Orleans, 
would  be  fifty  cents  a hundred  pounds,  or  any  sum — I merely  men- 
tion that  to  give  the  committee  an  idea — the  road  from  Chicago  to 
Cairo  is  365  miles ; from  Cairo  to  New  Orleans  550  miles ; of  that 
fifty  cents,  however,  there  is  an  arbitrary  charge  of  two  cents  per 
hundred  pounds  for  what  is  known  as  inter-State  transfer,  that  is 
by  boat  for  carrying  across  the  river;  that  would  be  taken  out  of 
the  through  rate,  and  48  cents  would  be  left  to  be  divided  between 
those  two  lines  on  a mileage  basis. 

Now,  we  take  the  Gilman,  Clinton  and  Springfield  line.  For  all 
business  originating  on  or  destined  for  the  Gilman,  Clinton  and 
Springfield  line,  and  going  to  or  coming  from  any  point  on  the  Illi- 
nois Central  line,  except  Chicago,  it  is  prorated  on  a mileage  basis, 
according  to  the  actual  number  of  miles  run  on  each  line.  We 
make  a car-haul  rate  with  the  Gilman,  Clinton  and  Springfield 
Kailroad  on  business  to  or  from  Chicago.  The  same  line  of  policy 
holds  good  with  the  middle  division  of  Illinois  Central  Kailroad  for 
points  on  that  division.  The  car-haul  rate  is  a specific  sum  that 
inures  to  the  Illinois  Central,  whether  that  be  more  or  less  than  a 
prorate.  In  some  instances  it  is  much  less  than  a prorate  would  be. 
On  this  middle  division,  crossed  as  it  is  by  three  competing  lines  to 
Chicago,  we  must  allow  to  it,  to  furnish  it  revenue  enough  to  pay 
its  expenses,  an  excess  over  and  above  what  its  pro  rata  would  give 
it  on  a strictly  mileage  basis,  and  for  the  reason  (which  holds  good 
both  of  the  Springfield  division  and  in  the  middle  division),  that 
either  one  of  those  lines  could  take  the  traffic  which  originates  on 
them,  and  have  it  hauled  from  the  point  of  crossing  with  other  com- 
peting lines  with  the  Illinois  Central  Kailroad  to  Chicago  at  the 
same  or  perhaps,  in  some  instances,  at  a lesser  rate  than  the  Illi- 
nois Central  now  gets.  That  was  the  case  with  the  Gilman,  Clinton 
and  Springfield  Koad  as  well  as  the  Toledo,  Peoria  and  Warsaw 
Kailroad,  now  a part  of  the  Wabash  system,  prior  to  its  passing 
into  the  hands  of  the  Wabash  Company.  The  management  of  the 
Illinois  Central  Kailroad,  when  it  got  control  of  the  Gilman,  Clin- 
ton and  Springfield  Kailroad  and  the  middle  division,  conceived  it 
to  be  to  the  interest  of  the  Illinois  Central  Kailroad  Company  proper, 
to  transport  on  its  line  that  business  from  the  point  of  junctions 
with  those  two  divisions  with  the  Illinois  Central  to  Chicago,  at  the 
rates  which  other  competing  lines  reaching  Chicago  were  willing  to 
transport  that  business  for,  as  long  as  there  was  any  profit  in  the 
business  io  the  Illinois  Central  upon  a car-haul  rate. 


54 


Now,  taking  the  basinoss  that  originates  on  the -Northern  Division 
of  the  Illinois  Central  proper,  north  of  Polo  and  Poreston  on  to 
East  Dubuque,  that  is  destined  for  Chicago,  it  is  hauled  to  For- 
eston,  and  there,  under  a car-haul  rate  with  the  Chicago,  Burlington 
and  Quincy  Railroad,  it  is  transported  to  Chicago.  For  the  busi- 
ness that  originates  on  the  main  line  of  the  Illinois  Central  south 
of  Polo,  and  between  Polo  and  Tonica,  a station  south  of  the  Illi- 
nois river,  the  traffic  is  hauled  to  Mendoia,  and  thence  we  have  a 
car-haul  rate,  if  we ‘elect  to  give  that  traffic  to  the  Burlington  road 
at  that  point.  Since  the  middle  division  has  been  built,  however, 
running  across  to  Minonk,  we  are  hauling  a large  amount  of  that 
traffic  down  to  Minonk,  and  there  give  it  over  to  the  middle  division, 
which  brings  it  over  to  Otto  on  the  Chicago  branch,  and  the  traffic 
is  prorated  between  the  main  line  and  the  middle  and  Chicago 
divisions,  thus  enabling  us  to  concentrate  upon  the  Illinois  Central 
line  proper  the  largest  amount  of  traffic  we  can  control. 

For  the  business  from  Chicago  to  St.  Louis,  we  prorate  on  a mile- 
age basis  with  the  Vandalia  line,  striking  that  line  at  Effingham, 
which  is  about  200  miles  south  of  Chicago.  For  business  originating 
on  the  main  line  destined  for  St.  Louis,  we  reach  St.  Louis  over 
the  Vandalia  line  by  way  of  Vandalia,  and  that  business  is  divided 
on  agreed  percentage,  which,  with  the  exception  of  the  shorter  hauls, 
is  practically  a prorata.  To  illustrate  what  I mean  by  that : If  the 

Vandalia  line  hauled  it  75  miles  and  we  125  miles,  making  the  total 
distance  200  miles,  we  should-  receive  125  parts  of  that  revenue  as 
our  proportion  of  the  business. 

Q.  And  they  would  receive  75  ? 

A.  And  they  would  receive  75. 

Q.  That  is  your  arrangement  with  that  Company? 

A.  Yes,  sir. 

Mr.  Varnell — Now,  the  business  which  originates  from  south  of 
Cairo,  coming  over  your  road  by  way  of  the  Short  Line? 

A.  Now,  sir,  we  will  take  up  Cairo,  if  you  please,  and  St,  Louis 
first,  and  then  go  south  of  the  river  afterwards.  From  Cairo  to 
St.  Louis,  with  the  Cairo  Short  Line,  the  distance  of  one  line  is 
about  71  miles  and  the  other  78.  The  business  there  is  prorated 
per  mile,  except,  as  Mr.  Welling  stated  to  the  committee,  when  it  is 
intended  for  some  local  point  on  the  line.  Now,  when  we  have  busi- 
ness coming  from  the  south, — and  when  I say  south,  I mean  the 
committee  to  understand  me  south  of  Cairo,  on  the  southern  divi- 
sion, as  it  is  now  known — we  make  a through  rate.  Take  lumber, 
for  instance — take  sugar,  molasses,  fruit  of  all  kinds ; we  make  a 
through  rate  from  New  Orleans  to  either  St.  Louis  or  Chicago,  and 
we  prorate  that  between  the  lines  south  of  the  river,  the  Illinois 
Central  to  DaQuoin,  and  the  Cairo  Short  Line  to  St.  Louis,  strictly 
upon  a mileage  basis  in  all  instances.  We  concede  nothing  to  the 
lines  north  of  the  river  on  the  percentage  of  that  business,  because 
of  the  fact  that  we  could  reach  other  points  above  St.  Louis  and 
Chicago  without  using  the  Illinois  Central  railroad  at  all,  and  get 
as  much  allowed  to  us  by  the  Wabash,  or  by  the  Narrow  Gauge, 
or  by  the  Iron  Mountain,  over  to  St.  Louis  and  to  Chicago,  as  the 
Illinois  Central  would  be  willing  to  pay  us.  On  all  local  business 


55 


south  bound  to  any  point  on  that  southern  division,  or  north  bound 
to  any  local  point  on  the  Illinois  Central  Eailroad,  we  take  the  local 
tariff  of  the  road  south  of  the  river,  compute  what  it  would  produce 
to  Cairo,  including  the  two  cents  transfer ; then  we  take  the  Illinois 
Central  local  tariff  from  Cairo  to  that  point  of  destination,  and  those 
two  charges  make  the  through  rate  from  the  point  of  embarkation 
to  the  point  of  destination.  The  reason  why  we  will  not  prorate 
that  business  with  the  Illinois  Central  north  of  the  river,  or  with 
any  other  line  north  of  the  river,  is  the  fact  that  our  rates  south  of 
the  river  range  from  75  to  125  per  cent,  higher  than  the  Commis- 
sioners’ rates  in  Illinois ; and  if  we  did  so,  we  should  simply  be 
subscribing  to  the  road  on  the  north  side  of  the  river,  and  aiding 
them  out  of  what  they  conceive  to  be  sharp  and  close  quarters. 
We  say,  ‘'We  are  very  fond  of  you,  but  not  fond  enough  of  you  to 
divide  our  revenue  upon  that  basis,” 

Mr.  Varnell — Tou  give  the  road  north  of  the  river  the  rate  fixed 
by  the  Eailroad  and  Warehouse  Commissioners? 

A.  Yes. 

Q.  And  do  the  best  you  can  after  you  get  on  the  other  side? 

A.  That  is  it. 

Mr.  Crews — Proceed,  Mr.  Clarke,  in  your  own  way. 

A.  Mr.  Chairman,  in  reference  to  the  question  that  you  asked 
Ihe  auditor  of  the  company,  what  was  the  reason  why  car-haul 
rates  should  be  made  on  freight  and  a pro  rate  on  passengers  in 
connection  with  the  Gilman  road — 

Q.  If  you  pro  rate  on  passengers,  why  do  you  not  also  pro  rate  ' 
on  freight? 

A.  The  reason  that  it  is  not  done  is  this : The  passenger  traffilc 

interchanged  between  those  lines  at  Gilman  is  of  a very  small  vo  - 
ume,  and  its  whole  aggregate  amounts  to  but  a very  small  amount. 
The  passenger  train  running  on  the  Gilman,  Clinton  and  Springfield 
Eailroad,  from  Gilman  to  Springfield,  earns  about  38  cents  per  mile 
run,  which  is  a little  less,  we  think,  than  it  costs  to  run  it.  But 
there  is  the  necessity  to  run  it  in  order  to  give  the  people  who  live 
along  that  line  an  opportunity  of  going  to  and  from  Chicago  and 
Springfield  and  local  points,  for  the  purpose  of  transacting  such 
business  as  they  may  have,  and  we  think  that  the  running  of  the 
passenger  train,  though  it  were  done  at  a loss,  aids  and  secures  to 
a certain  extent  the  freight  moved  or  to  be  moved  between  the 
several  points.  If  the  shipper  and  dealer  was  not  enabled  to  have 
this  intercourse  between  these  different  points,  the  same  volume  of 
freight  probably  would  not  be  moved  on  the  road.  The  reason  why 
we  make  a car-haul  rate  on  the  freight  from  that  road  is  that  the 
Paducah  road  running  to  Chicago,  crossing  at  Gibson,  did  offer  to 
haul  that  freight  at  a car-haul  rate  from  that  point  to  Chicago  for 
seven  dollars  per  car,  and  probably  would  do  the  same  thing  to- 
morrow. They  did  do  it  at  about  that  rate  at  one  time.  Nov/  the 
rate  of  eight  dollars  a car  made  from  Gilman  to  Chicago,  leaves  a 
profit  to  the  Illinois  Central  Eailroad  Company  of  a small  amount, 
after  deducting  the  expenses  and  the  seven  per  cent,  paid  to  the 
State.  Upon  every  car  that  is  transported  from  that  road  to  Chi- 
cago at  eight  dollars,  the  State  receive  56  cents.  If  that  freight 


56 


were  carried  by  a rival  line  to  Chicago,  and  not  by  the  Illinois  Cen- 
tral, the  Illinois  Central  liailroad  Company  would  lose  the  amount 
that  the  freight  would  produce,  and  as  a matter  of  course,  we  all 
know  the  State  would  not  receive  anything.  The  State  would  lose 
its  56  cents,  or  whatever  the  percentage  comes  to.  Now,  the  volume 
of  freight  from  that  road  in  point  of  earnings,  I suppose  I might 
safely  say,  Mr.  Auditor,  is  about  eight  times  as  much  as  the  pas- 
senger. 

Mr.  Welling — Yes. 

Mr.  Clarke — I know  I am  within  bounds  when  I say  eight  times 
as  much  as  the  passenger,  and  I think,  as  the  manager  of  the  Illi- 
nois Central  Company,  when  I can  transport  the  traffic  coming  from 
that  line  to  Chicago,  in  connection  with  my  through  regular  trains 
that  run  from  Champaign  to  Chicago,  without  being  compelled  to 
put  on  special  train  service  to  transact  that  business,  if  there  is 
any  profit  in  it  at  all,  that  I had  better  secure  that  business  for  the 
Illinois  Central,  and  concentrate  it  on  the  Illinois  Central,  at  what- 
ever rate  I can  command,  rather  than  permit  it  to  go  on  a rival 
line.  Again,  if  the  freight  went  by  a rival  line  from  that  road — 
when  I speak  of  a rival  line,  gentlemen,  you  understand  I mean  a 
rival  line  to  the  Illinois  Central,  a competing  line — the  freights  re- 
turned to  that  road  would  likely  go  by  that  rival  line,  or  the  same 
channel  through  which  its  traffic  came  to  Chicago.  We  have  certain 
numbers  of  trains  that  must  run  between  Chicago  and  Champaign,, 
without  reference  to  whether  that  train  is  fully  loaded  or  not,  and 
we  seldom  run  a train  south  bound  from  Chicago  to  Champaign,  in 
which  the  same  engine  could  not  haul  four  or  five  more  cars  in  that 
train ; and  that  is  one  of  the  reasons  why  we  are  able  to  make 
with  the  Springfield  division  and  the  middle  division  car-haul  rates. 
The  committee  will  see  that  the  rate  obtained  in  that  car-haul  i& 
about  one  cent  per  ton  per  mile,  in  round  numbers.  The  same  is 
the  case  with  the  middle  division,  which  is  hauled  60  miles  ©n  the 
Illinois  Central  Kailroad,  Otto,  the  junction  station,  being  four  miles 
south  of  Kankakee.  The  car-haul  rate  upon  that  division  is,  I think, 
one  cent  per  ton  per  mile ; a fraction  over,  isn’t  it,  Mr.  Auditor  ? 

Mr.  Welling — Yes,  a cent  a ton  a mile. 

Mr.  Clarke — That  is  what  I thought.  Bat  the  committee  by  look- 
ing at  those  two  rates  of  a cent  per  ton  per  mile,  will  find  in  many 
instances  that  it  is  a higher  rate  than  is  allowed  by  the  Eailroad 
and  Warehouse  Commissioners  of  Illinois  in  the  schedule  of  rates 
which  they  have  made  for  transportation.  This  car-haul  rate  gives 
a higher  rate  in  some  instances,  I do  not  mean  to  say  in  all,  than 
do  the  established  rates  made  by  the  Commissioners  of  Illinois. 

Each  of  those  divisions  get  a specific  sum  for  express  and  postal 
business,  which  are  settled  by  distinct  contract,  and  the  mail  pay 
for  transporting  the  mails  over  the  roads  is  such  as  the  Congress 
of  the  United  States  fixes  for  those  lines,  paid  in  proportion  to  the 
weights  transported.  The  local  earnings  of  each  of  those  lines — I 
mean  the  strictly  local  earnings  of  each  of  those  lines,  that  are 
now  operated  by  the  Illinois  Central,  and  worked  in  connection  with 
it,  accrues  to  the  lines  upon  which  this  local  business  is  performed. 
The  only  object  of  having  them  worked  by  the  Illinois  Central 
management,  the  Illinois  Central  being  lessees,  but  not  entire 


57 


owners,  or  owning  but  a proprietary  interest  in  these  lines,  is  for 
the  purpose  of  reducing  the  expenses  of  management  rather  than  to 
maintain  separate  organizations. 

Now  sir,  I really  don’t  know  that  I can  think  of  anything  else  in 
this  matter  to-day,  but  if  there  is  any  question  that  any  gentleman 
of  the  committee  desires  to  ask  me,  if  I am  competent  and  can 
make  myself  understood,  I shall  take  great  pleasure  in  answering  it. 

Mr.  Pearson — Do  you  say  the  car-haul  rate  from  Gilman  to  Chi- 
cago is  higher  than  the  schedule  rates  fixed  by  the  Commissioners  ? 

A.  In  some  instances ; not  m all.  I say,  by  taking  the  schedule 
^ rates  adopted  by  the  Commissioners,  it  will  be  found  that  it  is  less 
than  a cent  a ton  a mile  in  some  instances,  while  these  car-haul 
rates  produce  a cent  a ton  a mile. 

Mr.  Caldwell — Explain  the  item  called  “miscellaneous”  in  the 
statement;  what  do  they  include? 

A.  Miscellaneous  receipts,  do  you  mean  ? 

Q.  Yes. 

A.  Well,  sir,  I can  really  hardly  define  it  to  you,  but  it  is  mis- 
cellaneous traffic  of  all  sorts  and  description  that  would  not  come 
under  the  head  of  a classification,  mail,  express,  and  things  of  that 
sort. 

Mr.  Welling — Do  you  mean  in  our  return  to  the  State? 

Mr.  Caldwell — Yes,  you  say  certain  receipts  called  miscellaneous, 
what  are  they? 

Mr.  Welling — I will  give  you  some  of  them. 

Mr.  Caldwell — Can  you  give  me  all  that  are  covered  by  the  head- 
ing “miscellaneous”  in  the  report? 

Mr.  Welling — Switching,  rents,  sleeping  cars,  storage,  and  dock- 
age ; those  are  some  of  the  items,  and  I think  all. 

Mr.  Caldwell — Is  there  any  rule  applied  to  the  division  of  those 
miscellaneous  earnings  ? 

Mr.  Welling — They  are  all  local,  except  through  sleeping  cars,  the 
earnings  of  which  are  divided  pro  rata. 

Mr.  Clarke— Anything  under  the  head  of  miscellaneous  except 
• sleeping  car  earnings  is  not  through  business.  If  it  is  through  busi- 
ness, it  would  come  under  the  head  of  some  classification. 

Mr.  Caldwell— So  that  is  all  indivisible? 

Mr.  Welling — Yes,  they  are  indivisible  as  between  the  divisions  of 
the  line ; they  are  all  local  except  sleeping  car  earnings,  as  before 
stated. 

Mr.  Crews — I will  ask  you  if  the  tonnage  and  business  of  the  main 
line  in  Illinois  and  the  Chicago  branches  has  not  greatly  increased 
since  1875? 

A.  In  seven  years  it  has,  sir;  perhaps  in  one  or  two  years  of 
that  time  it  has  fluctuated,  and  may  have  been  a little  less,  but 
taking  the  whole  period  of  five  years,  it  has  increased  largely. 

Q.  About  what  per  cent,  has  it  increased,  say  from  1875  to  1880? 


58 


A.  I should  think,  sir,  that  the  increase — of  course  I am  giving 
you  a mere  opinion  now  without  absolute  knowledge  of  this  subject 
— I should  suppose  it  has  increased  thirty  per  cent. — thirty-three 
and  a third  per  cent.  With  your  permission,  I will  hand  this  paper 
in  answer  to  that  question,  because  there  it  is  in  actual  figures ; that 
statement  of  course  is  from  the  books. 

Mr.  Ackerman — We  carried  twice  as  much  business  last  year  for 
the  same  money  that  we  did  ten  years  ago. 

Mr.  Caldwell — That  would  make  your  rate  only  one  half  what  it 
was  ten  years  ago? 

Mr.  Ackerman — Just  one  half,  sir.  % 

Mr.  Welling — That  statement  shows  the  rate  per  ton  per  mile  of 
the  whole  line,  and  not  over  the  Illinois  line  alone ; we  would  not  be 
able  to  give  it  for  the  Illinois  Central  proper  during  all  those  years. 

Mr.  Crews — You  say  here  “reduction  in  rate  applied  to  the  ton- 
nage of  each  year?” 

A.  You  see  what  I mean  by  that.  The  difference  shows  what  a 
terrible  shrinkage  there  has  been — over  nineteen  millions  of  dollars 
since  187‘2. 

Mr.  Crews— The  rates  are-  no  lower,  I suppose,  in  other  States  than 
they  are  in  this? 

A.  No. 

Mr.  Ackerman — The  general  reduction  has  been  about  uniform  in 
Iowa  and  Illinois. 

Mr.  Crews — How  many  miles  is  this  estimate  made  on? 

Mr.  Welling — Last  year,  1,330  miles. 

Mr.  Clarke — By  dividing  it  we  get  the  approximate  amount  for  this 
State. 

Mr.  Crews — Then  had  the  rate  kept  up  to  what  it  was  in  1871,  the 
increase  of  gross  earnings  on  that  part  of  the  road  in  which  the 
State  is  interested,  would  have  been  in  the  neighborhood  of  ten 
millions  of  dollars  more  than  it  has  been? 

A.  Somewhere  from  eight  to  ten  millions. 

Q.  About  ten,  according  to  this? 

A.  Yes,  between  nine  and  ten  millions. 

William  K.  Ackerman,  having  been  duly  sworn,  testified  as  fol- 
lows : 

EXAMINED  BY  THE  CHAIRMAN. 

Q.  What  is  your  name? 

A.  William  K.  Ackerman. 

Q.  What  is  your  occupation? 

A.  I am  President  of  the  Illinois  Central  Kailroad  Company? 

Q.  How  long  have  you  been  president? 

A.  I have  been  president  for  about  five  years,  and  in  the  service 
of  the  company  continuously,  m various  positions,  since  the  28th  of 
May,  1852 — thirty  years,  next  spring. 


59 


Q.  I will  cask  you,  Mr.  Ackerman,  as  president  of  the  road,  to  ex- 
plain why,  if  you  prorate  the  passenger  business  between — say  points 
on  the  Kankakee  and  Southwestern  road  and  Chicago,  why  do  you 
not  prorate  freights? 

A.  Because  in  one  case  we  have  almost  absolute  control  of  the 
business,  as  in  the  case  of  passenger  business,  but  when  our  freight 
gets  to  Kankakee,  there  our  lines  come  into  competition  with  an  east 
and  west  line,  and  oftentimes  the  rate  from  Kankakee  to  New  York, 
Boston,  Philadelphia,  or  Baltimore,  is  as  low  as  from  Chicago, — or, 
at  least,  the  difference  is  very  small.  You  have,  then,  at  Kankakee, 
at  Gilman,  and  at  every  other  junction  point,  for  that  matter,  a 
strong  competition  to  meet ; making  it  difficult  to  hold  business.  I 
thought  Mr.  Clarke  did  not  dwell  upon  that  as  fully  as  he  might,  or, 
rather,  did  not  explain  it  in  that  particular  way.  It  is,  perhaps, 
the  best  answer  that  could  be  made  to  that  question — as  to  why  we 
prorate  one  and  do  not  the  other. 

Q.  Are  car-haul  arrangements — such  as  you  have  made  with  lat- 
eral lines  controlled  by  your  company  in  Illinois — are  they  common 
among  railways? 

A.  I believe  they  are  common  among  the  larger  lines  of  the  west. 
They  are  often  given  to  weak  connecting  lines  in  order  to  secure  the 
business  of  those  lines  and  enable  them  to  live.  Take  our  own  case 
with  the  Chicago  and  Springfield  road  and  the  Kankakee  and  South- 
western : neither  of  those  lines,  operated  locally,  could  pay  their 
expenses  and  the  interest  on  their  debt.  One  of  these  lines  we  built 
ourselves,  and  as  an  inducement  for  parties  to  loan  us  the  money  to 
build  the  road,  we  put  in  the  lease  a clause  in  relation  to  this  car- 
haul,  in  fixing  the  rate  of  which,  we  were  governed  by  the  rates 
given  and  received  by  other  lines.  Although  the  Kankakee  and 
Southwestern  and  the  Springfield  and  Chicago  roads  are  both  leased 
lines  of  the  Illinois  Central,  yet  their  ownership  is  entirely  separate 
and  distinct, — at  least,  as  far  as  that  ownership  extends  to  a mort- 
gage on  the  property.  In  making  this  reference  to  the  car-haul  rate 
in  the  Kankakee  and  Southwestern  lease,  page  8,  (and  I want  to 
put  this  lease  in  as  a part  of  the  testimony),  you  will  see  that  a 
provision  is  made  for  a readjustment  of  this  rate  from  time  to  time, 
by  experts.  This  readjustment  is  to  take  place  every  two  years,  by 
two  disinterested  referees  versed  in  railway  management,  who  are 
to  be  governed,  in  making  this  rate,  by  the  same  considerations  that 
would  influence  or  control  their  judgment  if  these  leased  lines  were  op- 
erated, managed  and  controlled  by  an  independent  company,  entirely 
distinct  from  the  Illinois  Central  company.  Every  time  a readjustment 
of  this  rate  is  made,  it  is  to  remain  in  ^orce  for  two  years.  That 
is  a copy,  Mr.  Chairman,  of  the  lease  I have  referred  to.  (Presenting 
printed  copy  of  lease.) 

I have  had  prepared  a statement,  for  my  own  satisfaction,  and 
which  I desire  to  show  to  the  committee,  giving  the  result  of  op- 
erating the  Springfield  railroad  for  the  last  five  years,  and  the  result 
of  operating  the  Kankakee  and  Southwestern  railroad  for  the  past 
four  years,  covering  the  period  we  have  had  control  of  those  lines. 
This  statement  shows  that  if  either  of  those  lines  was  to  rely  upon 
a strict  prorate  for  their  portion  of  the  revenue,  they  could  not,  as 


()0 


I have  stated,  pay  their  operating  expenses  and  interest  on  their 
debt; 

After  making  this  statement  it  may  be  supposed  that  the  debt  of 
the  two  lines  referred  to  is  very  large,  but  the  reverse  of  this  is 
true.  The  Chicago  and  Springfield  road  has  a debt  of  $1,600,000, 
which  is  about  $14,000  a mile.  This  includes  equipment  and  every- 
thing. This,  I think,  any  one,  though  not  versed  in  railway  mat- 
ters, will  readily  perceive  is  a very  small  amount  of  debt, — about 
$14,000  a mile,  including  the  equipment  of  the  road.  The  Kanka- 
kee and  Southwestern  road  has  a debt  of  about  $12,000  a mile, 
which  covers  the  roadbed  and  equipment.  In  building  this  line  we 
tried  to  keep  the  cost  of  it  down  to  as  low  a figure  as  possible,  and 
we  supplied  the  iron  with  which  it  was  laid,  and  only  charged  for 
it  $20  a ton,  being  about  the  price  we  could  have  sold  the  iron  for. 
It  was  to  secure  the  parties  who  took  the  bonds — i.  e.,  who  bought 
the  bonds  of  us,  the  proceeds  of  which  built  the  Kankakee  and 
Southwestern  road, — that  this  arrangement  was  made,  and  reference 
was  made  to  it  in  the  lease  between  the  Illinois  Central  and  the 
Kankakee  and  Southwestern  companies.  This  advantage  of  a car 
haul  rate  was  an  additional  guarantee  given  them  on  all  business 
coming  from  or  going  to  that  line  from  or  to  Chicago.  Before  the 
Illinois  Central  Bailroad  Company  leased  the  Chicago  a,nd  Spring- 
field  road  on  the  first  of  December,  1877,  and  while  that  road  was 
being  operated  by  its  former  owners,  and  known  as  the  Gilman, 
Clinton  and  Springfield  Bailroad,  the  Illinois  Central  Company,  in 
order  to  secure  its  business,  guaranteed  them  a car  haul  rate  be- 
tween Chicago  and  Gilman.  Without  doing  this  the  Illinois  Central 
Company  could  not  have  secured  the  business  of  this  one  hundred 
and  twelve  miles  of  road.  After  it  had  leased  this  line  the  owner- 
ship was  practically  unchanged — that  is  to  say,  it  belonged  to  one 
set  of  bondholders  when  this  car  haul  rate  was  first  made,  and  a 
new  set  of  bondholders  came  in  after  the  re-organization.  We  do 
not  own  any  of  the  bonds  of  that  road,  and  the  capital  stock  is 
very  small— $25,000  on  the  whole  line — which  we  do  own.  No  divi' 
dends  have  ever  been  paid  on  this.  The  old  bondholders  then 
came  into  possession  of  the  line  under  a new  organization  after 
foreclosure.  The  Illinois  Central  Company  leased  the  Chicago  and 
Springfield  and  the  Kankakee  and  Southwestern  roads  to  protect 
the  business  on  its  own  line.  In  the  case  of  the  Kankakee  and 
Southwestern,  it  was  built  for  the  express  purpose  of  protecting  the 
revenue  of  the  Chicago  branch  on  the  west.  If  it  had  not  been 
built  that  territory  would  have  been  taken  up  by  a projected  line 
known  as  the  Decatur  State  Line  Eoad,  and  we  should  have  lost 
considerable  business  in  that  locality.  In  protecting  its  own  busi- 
ness it  also  protected  the  interests  of  the  State  by  securing  to  the 
Illinois  Central  proper  business  it  would  otherwise  have  lost  by  di- 
version to  other  lines.  Both  of  the  leased  lines  referred  to  are  sep- 
arate and  distinct  in  organization  and  ownership  under  the  general 
law  of  the  State,  and,  I need  hardly  say,  are  not  operated  under 
the  terms  of  the  charter  of  the  Illinois  Central  Company,  each  of 
them  paying  their  own  taxes  and  assessments  that  are  levied  from 
year  to  year.  By  the  lease  of  these  two  lines  just  so  much  addi- 
tional business  is  secured  to  the  Illinois  Central  proper,  upon  which 
the  State  receives  its  7 per  cent  tax.  The  business  of  either  the 


61 


lines  referred  to  could  be  sold  to  the  east  and  west  trunk  lines  at 
Gilman  and  Kankakee  for  so  much  a car,  which  would  be  added  to 
the  local  earnings  of  the  leased  lines,  and  in  that  case  the  Illinois 
Central  would  lose  the  hauling  of  this  business,  and  the  State 
would  lose  the  7 per  cent  on  the  amount  now  received  for  the  haul- 
ing. Again,  the  car  haul  rate  received  by  the  Illinois  Central  Com- 
pany is  larger  than  that  usually  paid  to  other  companies  for  the 
same  distances.  The  car  haul  rate  with  these  companies  was  not 
made  for  the  purpose  of  evading  the  payment  of  any  portion  of  the 
7 per  cent  tax,  but  because  it  was  considered  a fair  business  trans- 
action in  which  the  State  had  an  equal  interest  with  the  company 
in  securing  the  business  which  it  would  not  otherwise  get,  and  for 
other  reasons  that  I have  stated. 

The  charter  requires  our  company  to  pay  upon  its  gross  receipts; 
no  reference  is  made,  or  any  dictation  inferred,  as  to  what  our  rates 
shall  be.  It  is  to  our  interest,  of  course,  to  secure  all  the  business 
we  can,  and  in  doing  this  we  are  largely  governed  by  the  action  of 
our  competitors.  Whatever  rates  they  make  we  must  necessarily 
follow,  but  under  certain  conditions  we  take  business  at  a very  low 
margin  of  profit  rather  than  haul  cars  empty.  In  any  event  the 
State  of  Illinois  is  the  gainer,  as  she  receives  7 per  cent,  on  the 
gross  earnings,  whether  there  is  any  profit  in  the  business  or  not. 
Even  with  the  car  haul  rate  we  receive  between  Kankakee  and  Gil- 
man, we  cannot  hold  all  the  business.  Much  of  it  is  at  this  very 
time  going  east  by  way  of  Gilman  and  Kankakee ; even  with  this 
inducement  to  bring  it  to  Chicago,  we  cannot  hold  it  as  against 
these  trunk  lines  running  east  from  these  two  points.  The  inference 
is  that  the  rates  are  more  favorable  on  those  lines,  or  that  they  are 
bidding  a little  stronger  for  the  business  than  we  can  afford  to  bid 
by  the  way  of  Chicago.  There  have  been  times  in  the  past,  during 
periods  of  strong  competition,  that  we  could  not  secure  this  business 
at  aJl,  even  with  a lower  car  haul  rate  than  we  have  been  giving, 
for  the  reason  that  the  rates  from  Kankakee  and  Gilman,  direct  to 
the  seaboard,  have  been  the  same  as  from  Chicago.  Of  course  there 
could  be  no  object  in  a shipper  sending  via  Chicago  m such  a case, 
and  no  object  in  our  attempting  to  haul  it  for  nothing  to  Chicago. 
I think  that  covers  all  I need  say  in  answer  to  that  particular 
question. 

• Q.  You  have  made  an  estimate  here  of  the  results  of  operating 
the  Chicago  and  Springfield  Kailroad,  and  also  the  Kankakee  and 
Southwestern,  on  a pro  rata  basis ; now  can  you  say  how  much  it 
would  have  increased  the  gross  earnings  of  the  Illinois  Central  if 
you  had  prorated  per  mile  with  the  Kankakee  and  Southwestern 
and  Springfield  Divisions?  How  much  would  the  difference  in  the 
gross  earnings  of  the  road  be? 

A.  I think  the  difference  to  the  State  would  have  been  very 
much  smaller  than  has  been  supposed.  I had  a statement  prepared 
some  time  ago  showing  what  that  difference  would  have  been,  and 
I was  surprised  to  find  that  it  was  so  small.  My  impression  is  that 
the  difference  to  the  State  of  Illinois  in  the  returns  we  make  would 
not  be  more  than  $3,oOU  a year  on  the  Chicago  and  Springfield 
Railroad.  That  is  to  say,  if  loe  coidcl  have  controlled  all  this  husuiess, 
and  had  prorated  it  to  Chicago,  the  State  would  have  received  $3,50J 


62 


a year  more  revenue  than  it  has  received.  Now,  on  the  Kankakee 
and  Southwestern  Kailroad  for  the  four  years,  my  impression  is 
that  the  difference  to  the  State  on  this  branch  of  102  miles  would 
have  been  something  over  $3,000  a year,  but  that  is  upon  the  pre- 
sumption that  we  could  have  secured  absolute  control  of  the  business 
of  these  two  lines  under  pro  rata  arrangements. 

Q.  Your  theory  is,  now,  that  had  you  prorated  this  business  with 
these  lines,  you  could  not  have  controlled  it,  and  it  would  have  gone 
to  Chicago  by  way  of  other  lines? 

A.  Yes,  sir,  that  is  my  reply.  In  fact,  in  justice  to  the  bond- 
holders of  'these  two  lines,  I think,  as  an  officer  of  the  Illinois  Cen- 
tral Company,  that  we  would  have  been  bound  to  have  sold  that 
business  at  Gilman  and  Kankakee  m order  to  have  guaranteed  them 
the  interest  on  their  bonds  and  prevented  the  lines  from  becoming 
a burden  on  the  Illinois  Central  Company.  In  fact,  I think  the 
bondholders  of  the  two  lines  referred  to  would  have  had  a right  to 
compel  us  to  get  the  most  revenue  we  could  on  the  roads  upon 
which  they  have  loaned  their  money. 

Mr.  Caldwell. — What  interest  does  this  Springfield  division  pay  on 
its  securities? 

A.  On  the  bonded  debt? 

Q.  Yes. 

A.  Six  per  cent.,  which  is,  as  you  will  all  admit,  a very  low  rate 
of  interest ; and  the  Kankakee  and  Southwestern,  live  per  cent. 

Mr.  Varnell — About  how  much  is  freight,  say  on  a car  load  of 
second  class  freight?  How  much  would  it  be  under  the  tariff  from 
Springfield  to  Chicago,  on  the  Gilman  and  Cfinton  route?  Say  112 
miles  over  the  Gilman  and  Clinton  road,  and  81  miles  over  the 
Illinois  Central,  what  would  be  the  rate  on  a car  load  of  second 
class  freight? 

A.  I must  confess  you  have  got  me  on  rates. 

Mr.  Clarke — I should  have  to  look  at  the  tariff  to  give  you  a cor- 
rect answer,  but  I should  think  it  would  be  somewhere  about  20 
cents  a hundred.  I don’t  know,  but  I should  judge  so,  because  I 
think  there  are  some  instances  where  it  is  about  the  same  relative 
distance,  18  to  22  cents. 

Mr.  Ackerman — With  your  permission  I should  like  to  make  this 
a part  of  my  testimony,  and  hand  this  statement  in,  showing  the 
result  of  operating  the  Chicago  and  Springfield  Eailroad  and  the 
Kankakee  and  Southwestern  Eailroad,  the  two  leased  lines  that 
have  been  referred  to,  on  a pro  rata  basis. 

(The  statement  referred  to  is  introduced  in  evidence  marked 
‘‘Exhibit  C.”) 

Mr.  Caldwell — You  mean  that  much  loss  would  appear  after  you 
had  paid  this  interest  that  you  guarantee? 

A.  Yes,  sir.  I want  to  show  by  this  statement,  having  presented 
it,  that  the  two  lines  in  question  would  not  have  got  the  interest 
on  their  debt  and  operation  expenses  upon  a strict  pro  rata,  and 
that  in  justice  to  the  parties  loaning  us  the  money  to  build  the 
Kankakee  and  Southwestern,  and  in  justice  to  the  ^bondholders  of 


68 


the  Chicago  and  Springfield  Railroad,  to  whom  we  are  under  obli- 
gations to  pay  the  interest,  we  could  not  have  conscientiously  pro- 
rated the  business ; that  it  would  have  been  due  to  these  parties 
holding  the  debt  against  the  companies  that  we  should  have  sold 
this  business  at  the  two  junction  points,  Gilman  and  Kankakee,  in 
order  to  throw  on  those  two  lines  locally,  the  largest  amount  of  net 
revenue  so  as  to  secure  the  interest  on  their  debts. 

The  Committee  then  adjourned  to  meet  at  the  same  place,  Friday^ 
March  23,  at  10  o’clock  A.  M. 


FRIDAY,  March  23,  1883. 

The  Committee  met  pursuant  to  adjournment,  at  10  o’clock  A.  M. 

The  testimony  of  Mr.  Ackerman,  taken  yesterday,  having  been 
read  over  to  him,  his  examination  was  proceeded  with  as  follows : 

Mr.  Caldwell — I wish  to  ask  the  amount  of  the  stock  of  the 
Springfield  and  Chicago  Railroad  Company,  the  112  or  113  miles 
from  Gilman  down? 

A.  The  total  capital  stock  is  $25,000. 

Q.  By  whom  is  that  held  or  owned? 

A.  That  is  owned  principally  by  the  Illinois  Central  Company. 

Q.  As  a company? 

A.  As  a railroad  company,  sir. 

Mr.  Pearson — They  have  the  control  of  it? 

A.  They  have  a controlling  interest  in  it.  I would  like  to  add 
further,  there  is  a separate  board  of  directors  for  this  company,  and 
each  of  the  directors  have  a small  holding  of  the  stock,  a nominal 
amount,  just  enough  to  qualify  them  to  act  as  directors;  but  the 
Board  of  Directors  of  the  Chicago  and  Springfield  Railroad  Company 
is  not  the  same  as  the  Board  of  Directors  of  the  Illinois  Central 
Company. 

Q.  And  the  bonded  debt  is  how  much? 

A.  $1,600,000,  as  stated. 

Mr.  Caldwell — I would  like  to  ask  this  question,  whether  or  not 
the  Board  of  Directors  of  the  Springfield  and  Chicago  Company  and 
the  Illinois  Central  Company  together  own  all  the  stock? 

A.  Yes,  sir,  they  do.  The  Board  of  Directors  of  the  Illinois 
Central  Company  ? 

Q.  No,  sir,  of  the  Springfield  and  Chicago  Railroad  Company. 

A.  Yes,  sir. 

Q.  They  and  the  Illinois  Central  Railroad  Company? 

A.  Yes,  sir. 

Mr.  Pearson — What  is  the  capital  stock  of  the  Kankakee  and 
Southwestern  Railroad  ? That  is  the  road  you  built,  I believe  ? 

A.  Yes.  The  capital  stock  of  that  line  is  $383,000,  and  I will 
explain  how  it  came  to  be  placed  at  that  sum.  When  the  con- 
struction of  the  road  was  first  undertaken,  we  expected  to  make  it 
a shorter  line  than  it  now  is,  and  our  people  thought  it  was  hardly 
worth  while  to  issue  a mortgage  on  it,  so  the  funds  were  provided 
from’  the  proceeds  of  this  $383,000  of  capital ; all  of  which  was  paid 
in,  in  cash.  Afterwards  when  we  extended  the  line  west  to  make  a 


64 


connection  with  our  main  line,  and  concluded  to  extend  it  south- 
westerly via  Colfax  to  Bloomington,  it  was  thought  better  to  create 
a mortgage,  which  was  done ; but  in  stating  the  cost  of  the  road  I 
based  my  calculation  only  upon  the  actual  cash  expenditures  upon 
the  line,  as  shown  by  the  amount  of  bonds  outstanding,  and  the 
amount  paid  in  of  this  of  capital  stock. 

y.  Who  is  the  president  of  the  Kankakee  and  Southwestern 
Railroad  ? 

A.  I am. 

Q,  What  proportion  of  the  stock  of  the  Springfield  and  Chicago 
Road  is  held  by  the  Illinois  Central  Road. 

A.  f>24,500  of  that  stock  is  owned  by  the  Illinois  Central  Rail- 
road Company,  and  $500  by  the  Directors  of  the  Springfield  and 
Chicago  Company. 

Q.  Has  any  examination  of  the  books  of  account  of  your  com- 
pany ever  been  had  by  order  of  the  Governor  of  the  State,  for  the 
purpose  of  verifying  the  accounts  rendered  by  you? 

A.  Yes,  sir;  our  books  were  examined  last  summer  at  the  in- 
stance of  Governor  Cullom,  who  appointed  two  competent  accountants 
to  perform  the  work,  Mr.  E.  F.  Leonard,  Mr.  H.  T.  Nash,  who  is 
now  auditor  of  the  St.  Louis,  Alton  and  Terre  Haute  Railroad 
Company.  They  spent  several  days  in  examining  our  books,  and 
made  a formal  report  to  the  Governor,  giving  the  result  of  their 
observations. 

Mr.  Caldwell — I will  ask  you  this  question : How  many  of  the 

directors  of  the  Springfield  and  Chicago  Railroad  are  directors  of 
the  Illinois  Central  Railroad,  or  do  you  remember? 

A.  Four  out  of  five  of  the  directors  of  the  Chicago  and  Springfield 
Railroad  are  directors  in  the  Illinois  Central  board. 

Q.  Comparatively  a small  amount  of  the  Kankakee  and  South- 
western stock  is  held  by  the  directors? 

A.  Comparatively  a small  amount,  yes,  sir;  just  enough  to  qualify 
them  to  act. 

Q.  Is  it  the  same  with  that  company  as  it  is  with  the  Springfield 
and  Chicago,  that  the  stock  is  all  held  by  the  Illinois  Central  Com- 
pany and  the  directors  of  the  Kankakee  and  Southwestern? 

A.  Yes,  sir. 

Mr.  Pearson — You  say  you  have  a controlling  interest  in  the  Kan- 
kakee and  Southwestern ; can  you  state,  Mr.  Ackerman,  what  inter- 
est you  have  in  it? 

A.  We  have  a controlling  interest  by  virtue  of  being  the  largest 
shareholders. 

Q.  Can  you  state  the  amount  of  stock  that  the  Illinois  Central 
Company  holds  in  the  Kankakee  and  Southwestern? 

A.  $881,100,  and  the  remainder  is  held  by  the  directors  of  that 
road,  and  out  of  the  nine  directors  of  that  company  three  of  them 
are  directors  in  the  Illinois  Central  Road. 

Mr.  Caldwell — Are  any  of  the  directors  of  the  Springfield  and  Kan- 
kakee lines  directors  in  both  or  not? 

A.  Yes ; that  is  perhaps  shown  in  the  reply  I made,  stating  that 
three  of  these  nine  directors  in  the  Kankakee  and  Southwestern 
Road  are  directors  of  the  Illinois  Central  Company. 


G5 


Q.  Are  any  of  the  directors  of  the  Springfield  and  Chicago  and 
of  the  Kankakee  line,  directors  in  each  of  those  companies? 

A.  Yes,  sir ; but  all  the  directors  in  the  Springfield  Company  are 
not  directors  in  the  Kankakee  and  Southwestern. 

Mr.  Pearson — And  also  directors  in  ‘the  Illinois  Central  ? 

A.  No,  not  necessarily. 

Q.  Then  the  six  directors  in  the  Kankakee  and  Southwestern  who 
are  not  directors  in  the  Illinois  Central,  hold  two  thousand  shares 
of  stock  in  the  Kankakee  and  Southwestern? 

A.  The  six  directors  of  the  Kankakee  and  Southwestern  who  are 
not  directors  of  the  Illinois  Central,  hold  §1,100  of  the  stock. 

Q.  Divided  among  the  six? 

A.  Among  the  six,  yes. 

Q.  They  hold  some  of  the  stock  so  as  to  be  made  directors  under 
the  law? 

A.  Yes,  they  are  small  holders ; three  and  two  and  one  share 
apiece,  so  as  to  qualify  them. 

Mr.  Caldwell — Are  you  president  of  both  of  these  companies,  both 
ihe  Springfield  and  Chicago  and  the  Kankakee  and  Southwestern? 

A.  Yes,  sir. 

Mr.  Varnell— What  is  the  amount  of  the  bonded  indebtedness  of 
the  Illinois  Central  Company  proper,  to-day?  I don’t  mean  your 
leased  lines  or  lateral  lines,  but  I mean  the  bonded  indebtedness  of 
the  Illinois  Central  Company. 

A.  It  stood  on. the  31st  of  December,  1882,  §7,681,000. 

Q.  What  is  the  capital  stock  of  the  Illinois  • Central  ? 

A.  §29,000,000,  all  of  which  has  been  paid  in  full. 

Q.  What  I want  to  get  at  is  this,  whether  the  capital  stock  of 
the  Illinois  Central  has  been  largely  increased  or  not? 

A.  It  has  been  increased  from  time  to  time  as  the  work  pro- 
gressed, yes,  sir.  I would  like  to  add  in  explanation  of  the  twenty- 
nine  millions,  that  it  represents  money  value. 

Q.  So  that  there  has  been  no  watering — what  we  term  watering 
of  that  stock? 

A.  No,  sir. 

Q.  It  has  not  been  increased  for  the  benefit  of  the  stockholders 
and  then  distributed — nothing  of  that  kind? 

A.  No,  sir,  except  to  represent  money  value  received  by  the  com- 
pany. 

Q.  What  amount  of  interest  do  you  pay  on  your  bonds?  * 

A.  We  pay  various  rates,  five  and  six  per  cent. ; I think  there 
■are  no  sevens  out  now. 

Q.  What  amount  of  dividend  is  declared,  for  instance,  for  1882 
upon  the  stock,  semi-annual  dividends  on  the  stock? 

A.  Three  and  a half  per  cent,  semi-annually. 

Q.  What  is  the  value  of  the  bonds  to-day — what  are  the  bonds 
quoted  at,  say  within  the  past  week? 

A.  Our  bonds  are  very  firmly  held  abroad  largely,  or  on  this 
side  of  the  water,  for  that  matter,  a large  amount  of  them,  and 

5— 


66 


there  are  very  few  transactions  in  them,  so  that  it  is  difficult  to 
give  a market  quotation  for  them,  but  they  all  bear  a premium,  I 
can  tell  you  that.  They  are  taken  up  largely  as  trust  funds  and 
things  of  that  kind,  so  that  there  is  not  that  extensive  dealing  in 
them  from  day  to  day  as  in  the  case  of  the  bonds  of  some  of  the 
other  large  railroad  companies. 

Q.  The  fact  is  that  the  condition  of  the  road  is  such  that  the 
bonds  pay  an  interest  of  five  and  six  per  cent.,  and  a dividend  on 
the  stock  of  about  seven  per  cent,  per  annum? 

A.  Yes,  sir. 

Mr.  Caldwell — Have  any  dividends  been  paid  on  the  stock  of  the 
Springfield  and  Chicago,  or  the  Kankakee  and  Southwestern,  since 
their  lease  by  the  Illinois  Central? 

A.  None  at  all. 

Mr.  VarneU — If  the  tonnage  carried  by  your  line  during  the  last 
twelve  or  fifteen  years  has  so  largely  increased,  why  is  it  that  the 
freight  revenue  derived  from  that  tonnage  has  not  increased  in  pro- 
portion ? 

A.  The  reason  for  that  is,  that  while  it  is  true  that  the  tonnage 
has  largely  increased,  yet  the  rates  received  for  transportation  of 
freight  have  largely  decreased ; so  that  to-day  we  are  hauling  about 
double  the  amount  of  tonnage  that  we  hauled  twelve  or  fifteen  years 
ago  for  the  same  amount  of  money.  This  explains,  I think,  the 
apparent  discrepancy  so  far  as  the  freight  business  of  the  line  is 
concerned.  In  reference  to  the  passenger  business,  you  gentlemen 
will  perhaps  remember  that  the  Board  of  Kailroad  and  Warehouse 
Commissioners^  about  two  years  since,  made  a new  schedule  rate, 
fixing  the  rate  per  mile  at  three  cents.  We  had  been  receiving 
before  that  as  high  as  four,  and  on  short  distances  as  high  as  five 
cents.  Much  of  our  passenger  business  is  made  up  of  local  travel. 
The  action  of  the  Eailroad  and  Warehouse  Commissioners  will  also 
apply  to  the  freight  schedules;  they  have  largely  reduced  the  rates 
during  the  past  two  • years,  having  made  two  revisions  of  their 
schedule. 

Mr.  Pearson— Did  not  the  original  schedule,  in  1873,  reduce  your 
rates  ? 

A.  Yes,  sir;  that  was  the  beginning. 

Q.  That  was  where  the  large  reduction  was  made,  I suppose? 

A.  Yes,  sir ; that  was  really  the  large  reduction ; a large  reduc- 
tion was  first  made  in  1873,  and  in  December,  1881,  a further  re- 
duction was  made,  and  in  April,  1832,  a still  further  reduction  was 
made.  While  we  contend  we  are  not  governed  by  the  rates  made 
by  the  State  Board,  yet  from  the  fact  that  the  rates  are  adopted 
by  our  competitors,  compelling  us  to  carry  at  the  same  prices, 
practically  it  operates  as  much  against  us  as  if  we  .did  come 
under  the  control  of  the  Board  of  Kailroad  and  Warehouse  Com- 
missioners. • , 

Mr.  Caldwell — To  any  competing  point  about  one  hundred  and 
ninety-three  miles  south  of  here  on  the  main  line,  which  is  the  sum 
of  the  distance  from  Chicago  to  Gilman,  and  Gilman  to  Springfield, 
how  would  the  proportion  of  earnings  to  the  line  from  Gilman  to 
Chicago  compare  with  the  eight  dollar  car-haul  allowed  main  line 
on  freight  to  and  from  Springfield — more  or  less. 


07 


A.  The  Commissioners’  tariff  on  a car  load  to  a point  one  hun- 
dred and  ninety-three  miles  south  of  Chicago,  would  give  us  $24.40 ; 
the  proportion  of  this  for  eighty-one  miles  would  be  $10.25;  but  at 
the  same  time  it  is  true  that  on  business  from  Chicago  to  various 
points  off  of  our  line  on  connecting  roads,  the  proportion  we  get 
for  eighty-one  miles  of  the  distance  from  Chicago  south  is  greatly 
below  what  we  receive  from  the  Gilman  road  for  a car-haul.  For 
instance,  between  Chicago  and  East  8t.  Louis,  the  rate  on  cattle  is 
$25  a car.  This  would  give  as  the  proportion  for  the  81  miles 
$6.66.  The  rate  of  freight  coming  under  the  head  of  class  A,  is 
$30  per  car;  the  proportion  for  the  81  miles,  $8.  The  rate  on 
class  B,  is  $26  per  car;  the  proportion  for  the  81  miles-  $6.93. 
The  rate  on  class  C is  $22  per  car,  of  which  the  81  miles  would 
get  $5.86.  The  rate  on  class  D is  $16  per  car,  of  which  the  81 
miles  would  get  $4.27.  The  rate  on  pork  is  $20  per  car,  of  which 
the  81  miles  would  get  $5.33. 

Again,  take  our  rates  from  Chicago  to  Cairo — 365  miles.  The  rate 
on  class  A is  $40  per  car,  of  which  the  81  miles  would  get  $8.80. 
The  rate  on  class  B is  $36  per  car,  of  which  the  81  miles  would 
get  $7.92.  The  rate  on  class  C is  $32  per  car,  of  which  the  81 
miles  would  get  $7.04.  The  rate  on  class  D is  $30  per  car,  of 
which  the  81  miles  would  get  $6.60.  The  rate  on  flour  is  $36  per 
car,  of  which  the  81  miles  would  get  $7,92  cents. 

Take  another  illustration : From  Chicago  to  Ashmore,  111.,  on  the 
Indianapolis  and  St.  Louis  road,  a distance  of  191  miles,  giving  us 
$16  a car  to  Mattoon,  of  which  the  81  miles  would  get  $7.53.  The 
rate  on  a car  load  of  lumber  from  Chicago  to  Dennison,  which  is  a 
point  on  the  Vandalia  line,  a distance  of  256  miles  from  Chicago, 
is  $30.  This  leaves  our  line  at  Effingham,  199  miles  south  of  Chi- 
cago. Our  proportion  on  this  rate  would  be  $25.56,  of  which  the 
81  miles  would  get  $7.59. 

Take  another  illustration:  Jewett,  on  the  same  road,  217  miles, 
the  rate  on  a car  load  of  lumber  is  $28.  This  leaves  our  line  at 
Effingham,  199  miles  south  of  Chicago.  The  Illinois  Central  pro- 
portion of  this  would  be  $17.36,  of  which  the  81  miles  would  get 
$7.06. 

From  the  illustrations  which  I have  given,  your  committee  will 
see  that  on  a very  large  amount  of  business  shipped  to  points  south 
of  Chicago,  both  on  our  line  and  to  connecting  roads,  the  proportion 
between  Chicago  and  Gilman  is  very  much  less  than  we  allow  the 
Chicago  and  Springfield  Eailroad  Company,  under  our  car-haul  ar- 
rangement with  that  company. 


Mr.  Welling  then  presented  the  following  papers  in-  connection  with 
his  testimony  given  yesterday : 

Statement  of  gross  earnings  of  Illinois  Central  Eailroad  Company 
proper  for  years  ending  October  31,  1876,  1877,  1878,  1879,  1880, 
1681  and  1882,  marked  “Exhibit  D.” 


G8 


. Statement  of  tons  of  freight  carried  one  mile,  and  rate  per  ton 
per  mile,  marked  “Exhibit  E.” 

Statement  of  gross  receipts  for  six  months  ending  April,  1878, 
marked  “Exhibit  F.” 

Statement  of  gross  receipts  in  Illinois  for  six  months  ending  Octo- 
ber 31,  1878,  marked  “Exhibit  G.” 

Statement  of  gross  receipts  in  Illinois  for  six  months  ending  April 
30,  1879,  marked  “Exhibit  H.” 

Statement  of  gross  receipts  in  Illinois  for  six  months  ending  Octo- 
ber 31,  1879,  marked  “Exhibit  J.” 

Statement  of  gross  receipts  in  Illinois  for  six  months  ending  April 
30,  1880,  marked  “Exhibit  K.” 

Statement  of  gross  receipts  in  Illinois  for  six  months  ending  Octo- 
ber 31,  1880,  marked  “Exhibit  L.” 

’ Statement  of  gross  receipts  for  six  months  in  Illinois  ending  April 
30,  1881,  marked  “Exhibit  M.” 

Statement  of  gross  receipts  in  Illinois  for  six  months  ending  Octo- 
ber 31,  1881,  marked  “Exhibit  N.” 

Statement  of  gross  receipts  in  Illinois  for  six  months  ending  April 
30,  1882,  marked  “Exhibit  0.” 

Statement  of  gross  receipts  in  Illinois  for  six  months  ending  Octo- 
ber 31,  1882,  marked  “Exhibit  P.” 

The  Committee  then  took  a recess  until  three  o’clock  P.  M. 

At  3 o’clock  P.  M.  the  Committee  reassembled  at  room  1C2  Palmer 
House,  Chicago.  No  witnesses  appearing,  the  Committee  adjourned, 
to  meet  at  the  same  place  Tuesday,  March  27,  at  10  o’clock  A.  M. 


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